The minimum potential transfer price is determined by
A)incremental costs in the selling division.
B)the lowest outside price for the good.
C)the extent of idle capacity in the buying division.
D)negotiations between the buying and selling division.

Question

Quizplus · Accepted Answer

The minimum potential transfer price is determined by the incremental costs in the selling division because it represents the lowest price at which the selling division would be willing to sell the product internally without incurring a loss. This includes variable costs and any avoidable fixed costs directly associated with producing the product for the internal transfer.

The Minimum Potential Transfer Price Is Determined by