Use the following to answer questions:
Vallarta Inc. has two divisions, P and Q, with the following information:

The variable cost of Division Q will be incurred regardless of where it purchases the components, internally or externally.
-If Division P has no excess capacity; the lowest transfer price Division P would be willing to accept would be
A) $25
B) $30
C) $38
D) $670

Question

Use the following to answer questions:
Vallarta Inc. has two divisions, P and Q, with the following information:
  
The variable cost of Division Q will be incurred regardless of where it purchases the components, internally or externally.
-If Division P has no excess capacity; the lowest transfer price Division P would be willing to accept would be
A) $25 
B) $30 
C) $38 
D) $670

Quizplus · Accepted Answer

When a division has no excess capacity, the lowest transfer price it would be willing to accept is its marginal cost plus the opportunity cost of not selling the product externally. If no specific costs are provided, the answer cannot be determined precisely from the given options. However, assuming the options are based on relevant costs and opportunity costs, the lowest transfer price would be the one that covers these costs. Without specific numbers or context, the correct choice is based on the assumption that $38 represents a price that covers both the marginal cost and any opportunity cost associated with not selling externally.

Use the Following to Answer Questions