An internal transfer between two divisions is in the best economic interest of t

Question

An internal transfer between two divisions is in the best economic interest of the entire organization whenever:   

a. the variable costs plus the opportunity cost of the selling division is greater than the external     price for the buying division.   

b. the variable costs plus the opportunity cost of the selling division is less than the external price     for the buying division.   

c. there is excess capacity in the buying division with no alternative use.   

d. there is no established market prices for the buying division.

Explanation / Answer

Answer:

Option b is correct.

the variable costs plus the opportunity cost of the selling division is greater than the external     price for the buying division.

Reason:- If the variable cost plus opportunity cost is less than the external price the company will show a higher profit

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