Page 134 - Microsoft Word - 00 P1 IW Prelims.docx

Chapter 9

Scenario 3: The selling division does not have surplus capacity

Transfer price
negotiated between

Minimum price selling division Maximum price buying
will accept is marginal cost + division will pay is same as
lost contribution from other scenario 2
product (opportunity cost)

Illustrations and further practice

Now try TYU question 8 and read Illustration 4 from Chapter 9 of the Study Text

124