When a transfer price is set lower
A)the profits of the division producing the intermediate product will rise
B)the profits of the division producing the intermediate product will fall
C)the costs of the division producing the intermediate product will rise
D)the costs of the division producing the intermediate product will fall

Question

Quizplus · Accepted Answer

When a transfer price is set lower, the revenue for the division producing the intermediate product decreases, leading to a fall in its profits.

When a Transfer Price Is Set Lower