In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 1?
A) $90
B) $91
C) $83
D) $73

Question

In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below:  The company uses the opportunity cost approach to transfer pricing. What is the maximum transfer price in Case 1?
A) $90 
B) $91 
C) $83 
D) $73

Quizplus · Accepted Answer

The opportunity cost of selling to Division B is the contribution margin of selling to outside customers which is $91 ($130 - $39). So, the maximum transfer price in Case 1 is $91.

In the Bombadier Company, Division a Has a Product That