A selling division with adequate capacity to fulfill the demand of the buying division should sell to the buying division at any price that recovers incremental costs.

Question

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If a selling division has enough capacity to fulfill the purchasing division's demand, it should sell to the purchasing division at any price that recovers incremental costs. This ensures that the company does not miss out on the opportunity to sell its products and also covers its costs. However, if the selling division cannot fulfill the demand of the buying division, then other factors such as market prices and competition should be considered.

A Selling Division with Adequate Capacity to Fulfill the Demand