The selling division in a transfer pricing situation should want the transfer price to cover at least the variable cost per unit plus the lost contribution margin per unit on outside sales.

Question

Quizplus · Accepted Answer

In a transfer pricing situation, the selling division should want the transfer price to cover at least its variable cost per unit plus the lost contribution margin per unit on outside sales. This ensures that the selling division does not incur a loss by transferring goods internally rather than selling them to external customers.

The Selling Division in a Transfer Pricing Situation Should Want