Question

When a transfer has no effect on fixed costs, to be acceptable to the selling division, the transfer price must ______. Multiple select question. cover any opportunity cost from lost sales cover a reasonable portion of the selling division's fixed costs cover any lost contribution margin due to the transfer equal the product's normal selling price cover the variable costs per unit

Answer 1

Answer:

• cover any opportunity cost from lost sales

• cover any lost contribution margin due to the transfer

• cover the variable costs per unit

Explanation:

A transfer is done from one division in a company to another.

When such is done, the transfer price should cover any opportunity costs that the division doing the transferring would be incurring to do so that way they would not make an economic loss.

Lost contribution margin should be covered as well for the same reason which is avoidance of cost.

Variable costs have to at least be covered so that the division does not make an accounting loss.