Sahara Corporation has no excess capacity. If the firm desires to implement the general transfer-pricing rule, opportunity cost would be equal to:

Question

Quizplus · Accepted Answer

Since Sahara Corporation has no excess capacity and the transfer-pricing rule must take into account the external market price, the opportunity cost would be equal to the contribution margin forgone from the lost external sale. This is because the internal transfer price should reflect the revenue that could be earned if the goods were sold in the external market, which represents the highest opportunity cost for the company.

Sahara Corporation Has No Excess Capacity