Economics · Transfer Pricing

Which transfer price best motivates divisional managers when there is spare capacity in the supplying division?

Verified Solution4 OptionsUpdated: October 2026👁️1 View

1Full cost + mark-up
2Marginal cost + opportunity cost
3Marginal (variable) cost✓
4Market price

Correct answer

Marginal (variable) cost

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Which transfer price best motivates divisional managers when there is spare capacity in the supplying division?

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