Asked by Sandra Risqiana on Sep 24, 2024
Verified
When a transfer price is decreased
A) the buying division will chose to purchase less from the selling division
B) the buying division will chose to purchase more from the selling division
C) the selling division will chose to purchase less from the buying division
D) the selling division will chose to purchase more from the buying division
Transfer Price
The price at which goods, services, or intellectual property are traded between divisions within the same company.
Buying Division
is a department within an organization responsible for purchasing goods and services the organization needs.
Selling Division
The division or part of an organization responsible for selling the company's products or services to customers.
- Comprehend the impact of transfer pricing on internal purchasing and sales choices.
Verified Answer
AC
Ashley Coons1 day ago
Final Answer :
B
Explanation :
If the transfer price is decreased, it becomes more attractive for the buying division to purchase goods from the selling division at a lower price. This means that the buying division will choose to purchase more from the selling division, as it becomes a cost-saving opportunity for them. Therefore, choice B is the best option.
Learning Objectives
- Comprehend the impact of transfer pricing on internal purchasing and sales choices.