Deck 9: Pricing

Question 1

In most cases, prices are set by the

A)customers.
B)competitive market.
C)largest competitor.
D)selling company.

Answer 1

B

Question 2

Market-based prices are least likely to be influenced by

A)the degree of product differentiation in the industry.
B)the level of competition in the industry.
C)the cost to manufacture the product or service.
D)if the product is a commodity.

Answer 2

C

Question 3

Use the following information for questions
Red Grass Company produces high definition television sets and uses total cost-plus pricing.The following information is available for this product:
$$\begin{array} { l l } \text { Fixed cost per unit } & \$ 100 \\\text { Variable cost per unit } & 300 \\\text { Total cost per unit } & 400 \\\text { Desired ROl per unit } & 140\end{array}$$

-The target selling price for this television is

A)$240.
B)$400.
C)$440.
D)$540.

Answer 3

$540.

Question 4

In cost-plus pricing, the target selling price is calculated as

A)variable cost per unit + desired ROI per unit.
B)fixed cost per unit + desired ROI per unit.
C)total unit cost + desired ROI per unit.
D)variable cost per unit + fixed manufacturing cost per unit + desired ROI per unit.

Question 5

All of the following are correct statements about the target price except it

A)is the price the company believes would place it in the optimal position for its target audience.
B)is used to determine a product's target cost.
C)is determined after the company has identified its market and does market research.
D)is determined after the company sets its desired profit amount.

Question 6

The following per unit information is available for a new product of Blue Ribbon Company who uses total cost-plus pricing: $$\begin{array} { l l } \text { Desired ROl } & \$ 15 \\\text { Fixed cost } & 50 \\\text { Variable cost } & 100 \\\text { Total cost } & 150 \\\text { Selling price } & 165\end{array}$$ Blue Ribbon Company's markup percentage would be

A)9%.
B)10%.
C)30%.
D)65%.

Question 7

Bryson Company has just developed a new product.The following data are available for this product: $$\begin{array} { l l } \text { Desired ROl per unit } & \$ 40 \\\text { Fixed cost per unit } & \mathbf { 6 0 } \\\text { Variable cost per unit } & \mathbf { 9 0 } \\\text { Total cost per unit } & 150\end{array}$$ The target selling price for this product is

A)$190.
B)$150.
C)$130.
D)$100.

Question 8

In cost-plus pricing, the markup percentage is calculated by dividing the desired ROI per unit by the

A)fixed cost per unit.
B)total cost per unit.
C)total manufacturing cost per unit.
D)variable cost per unit.

Question 9

Use the following information for questions
Red Grass Company produces high definition television sets and uses total cost-plus pricing.The following information is available for this product:
$$\begin{array} { l l } \text { Fixed cost per unit } & \$ 100 \\\text { Variable cost per unit } & 300 \\\text { Total cost per unit } & 400 \\\text { Desired ROl per unit } & 140\end{array}$$

-Red Grass Company's markup percentage would be

A)140%.
B)75%.
C)40%.
D)35%.

Question 10

Hen Company has developed a new product, egg crates that prevent breakage.The cost per crate is $50 and the company expects to sell 1,000 crates per year.Hen Company has invested $1,000,000 in equipment to produce the crates and desires a 10% return on investment.What is Hen Company's desired markup percentage?

A)10%
B)20%
C)100%
D)200%

Question 11

Market-based pricing is influenced by all of the following except

A)government regulation.
B)internal transfer prices.
C)product differentiation.
D)demand for the product.

Question 12

The cost-plus pricing approach's major advantage is

A)it considers customer demand.
B)that sales volume has no effect on per unit costs.
C)it is simple to calculate.
D)it can be used to determine a product's target cost.

Question 13

Cuff budgets sales of its truck tires at $160 per tire and estimates that 10,000 tires can be sold during the coming year.Variable costs per tire are $60 and Cuff desires a profit of $30 per tire.The target cost per tire is

A)$160.
B)$130.
C)$80.
D)$100.

Question 14

Prices are set by the competitive market when

A)the product is specially made for a customer.
B)there are no other producers capable of manufacturing a similar item.
C)a company can effectively differentiate its product from others.
D)a product is not easily distinguished from competing products.

Question 15

A company must price its product to cover its costs and earn a reasonable profit in

A)all cases.
B)its early years.
C)the long run.
D)the short run.

Question 16

Hen Company has developed a new product, egg crates that prevent breakage.The cost per crate is $50 and the company expects to sell 1,000 crates per year.Hen Company has invested $1,000,000 in equipment to produce the crates and desires a 10% return on investment.What is Hen Company's selling price for one egg crate?

A)$110
B)$150
C)$100
D)$250

Question 17

Which of the following has the most impact on setting a market-based price?

A)changes in quality of the product or service
B)prices charged by the company's suppliers
C)the efficiency of the company's supply chain
D)demand for the service or product

Question 18

All of the following are correct statements about the cost-plus pricing approach except that it

A)is simple to calculate.
B)considers customer demand.
C)includes only variable costs in the cost base.
D)will only work when the company sells the quantity it budgeted.

Question 19

Factors that can affect pricing decisions include all of the following except

A)cost considerations.
B)environment.
C)pricing objectives.
D)all of these are factors.

Question 20

In the cost-plus pricing approach, the desired ROI per unit is calculated by multiplying the ROI percentage by

A)fixed costs.
B)total assets.
C)total costs.
D)variable costs.

Question 21

In time-and-material pricing, a material loading charge covers all of the following except

A)purchasing costs.
B)related overhead.
C)desired profit margin.
D)all of these are covered.

Question 22

The markup percentage denominator in the variable cost-plus approach is the

A)desired ROI per unit.
B)fixed costs per unit.
C)manufacturing cost per unit.
D)variable costs per unit.

Question 23

The markup percentage in the absorption-cost approach is calculated by dividing the sum of the desired ROI per unit and

A)fixed costs per unit by manufacturing cost per unit.
B)fixed costs per unit by variable costs per unit.
C)selling and administrative expenses per unit by manufacturing cost per unit.
D)selling and administrative expenses per unit by variable costs per unit.

Question 24

The reasons for using the variable cost-plus approach include all of the following except this approach:

A)avoids arbitrary allocation of common fixed costs to individual product lines.
B)is more consistent with cost-volume-profit analysis.
C)provides the most defensible bases for justifying prices to all interested parties.
D)provides the type of data managers need for pricing special orders.

Question 25

Maggie Co.has variable manufacturing costs per unit of $20, and fixed manufacturing cost per unit is $15.Variable selling and administrative costs per unit are $4, while fixed selling and administrative costs per unit $6.Maggie desires an ROI of $7.50 per unit.If Maggie Co.uses the absorption-cost approach, what is its markup percentage?

A)8.33%
B)50%
C)16.67%
D)25%

Question 26

Maggie Co.has variable manufacturing costs per unit of $20, and fixed manufacturing cost per unit is $10.Variable selling and administrative costs per unit are $5, while fixed selling and administrative costs per unit $2.Maggie desires an ROI of $8 per unit.If Maggie Co.uses the variable cost-plus approach, what is its markup percentage?

A)50%
B)80%
C)30%
D)100%

Question 27

Under the absorption-cost approach, all of the following are included in the cost base except

A)direct materials.
B)fixed manufacturing overhead.
C)selling and administrative costs.
D)variable manufacturing overhead.

Question 28

The first step for time-and-material pricing is to calculate the

A)charge for obtaining materials.
B)charge for holding materials.
C)labour charge per hour.
D)charges for a particular job.

Question 29

The absorption-cost approach is used by most companies for all of the following reasons except that

A)absorption-cost information is readily provided by a company's cost accounting system.
B)absorption cost provides the most defensible bases for justifying prices to interested parties.
C)basing prices on only variable costs could encourage managers to set too low a price to boost sales.
D)this approach is more consistent with cost-volume-profit analysis.

Question 30

In the variable cost-plus approach, the markup percentage covers the

A)desired ROI only.
B)desired ROI and fixed costs.
C)desired ROI and selling and administrative expenses.
D)fixed costs only.

Question 31

Variable cost-plus pricing is most effective when a company

A)experiences high demand for its products.
B)produces a product over many years.
C)has excess capacity.
D)is operating at full capacity and receives a special order.

Question 32

The labour charge per hour in time-and-material pricing includes all of the following except

A)an allowance for a desired profit.
B)charges for labour loading.
C)selling and administrative costs.
D)overhead costs.

Question 33

In time-and-material pricing, the charge for a particular job is the sum of the labour charge and the

A)materials charge.
B)material loading charge.
C)materials charge + desired profit.
D)materials charge + the material loading charge.

Question 34

The last step in determining the material loading charge percentage is to

A)estimate annual costs for purchasing, receiving, and storing materials.
B)estimate the total cost of parts and materials.
C)divide material charges by the total estimated costs of parts and materials.
D)add a desired profit margin on the materials themselves.

Question 35

The first step in the absorption-cost approach is to calculate the

A)desired ROI per unit.
B)markup percentage.
C)target selling price.
D)unit manufacturing cost.

Question 36

Under the variable cost-plus approach, the cost base includes all of the following except

A)incremental manufacturing costs.
B)variable manufacturing costs.
C)total fixed costs.
D)variable selling and administrative costs.

Question 37

Partridge Co.has produced a product with a total unit cost of $60 and a desired ROI per unit of $25.If Partridge Co.'s target selling price is $85, what is its percentage markup on cost?

A)141.67%
B)100%
C)50%
D)41.67%

Question 38

In the absorption-cost approach, the markup percentage covers the

A)desired ROI only.
B)desired ROI and selling and administrative expenses.
C)desired ROI and fixed costs.
D)selling and administrative expenses only.

Question 39

What is a critical reason for a company to use cost-plus pricing?

A)The company has significant differences between its variable and fixed costs.
B)The company's suppliers have recently increased prices.
C)The company operates in a highly competitive market.
D)The company operates in a less competitive market.

Question 40

Which of the following is consistent with generally accepted accounting principles?

A)absorption-cost approach
B)variable cost-plus approach
C)variable-cost approach
D)both absorption cost and variable cost-plus approach

Question 41

Negotiated transfer pricing is not always used because the following reasons, except that

A)market price information is sometimes not easily obtainable.
B)a lack of trust between the negotiating divisions may lead to a breakdown in the negotiations.
C)negotiations often lead to different pricing strategies from division to division.
D)opportunity cost is sometimes not determinable.

Question 42

All of the following are approaches for determining a transfer price except the

A)cost-based approach.
B)market-based approach.
C)negotiated approach.
D)time-and-material approach.

Question 43

The transfer price approach that will result in the largest contribution margin to the buying division is the

A)cost-based approach.
B)market-based approach.
C)negotiated price approach.
D)time-and-material pricing approach.

Question 44

Use the following information for questions
The following data are available for Wheels 'N Spokes Repair Shop for 2020:
$$\begin{array} { l l } \text { Repair technician's wages } & \$ 150,000 \\\text { Fringe benefits } & 50,000 \\\text { Overhead } & \underline { 80,000 } \\\text { Total } & \underline { \$ 280,000}\end{array}$$ The desired profit margin is $15 per labour hour.The material loading charge is 35% of invoice cost.It is estimated that 4,000 labour hours will be worked in 2020.

-In January 2020, Wheels 'N Spokes repairs a bicycle that uses parts of $200.Its material loading charge on this repair would be

A)$35.
B)$70.
C)$235.
D)$270.

Question 45

Which of the following is true about the negotiated transfer pricing approach?

A)A minimum transfer price is established by the buying division.
B)A negotiated transfer price should be used when an outside market for the goods does not exist.
C)A maximum transfer price is established by the selling division.
D)It is used more often than the cost-based and market-based approaches.

Question 46

Which of the following is true?

A)In most cases, a company sets the price instead of it being set by the competitive market.
B)The difference between the target price and the desired profit is the target cost of the product.
C)In a competitive environment, the company must set a target cost and a target selling price.
D)The target cost is the price the company believes would place it in the most competitive position.

Question 47

A firm's transfer pricing policy should accomplish all of the following except

A)promote goal congruence.
B)maintain divisional autonomy.
C)provide accurate performance evaluation.
D)maximize the taxes paid in a foreign country.

Question 48

In the formula for the minimum transfer price, opportunity cost is the ___ of the goods sold externally.

A)variable cost
B)total cost
C)selling price
D)contribution margin

Question 49

The transfer price approach that is often considered the best approach because it generally provides the proper economic incentives is the

A)cost-based approach.
B)market-based approach.
C)negotiated price approach.
D)time-and-material pricing approach.

Question 50

All of the following are correct statements about the market-based approach except that it

A)assumes that the transfer price should be based on the most objective inputs possible.
B)provides a fairer allocation of the company's contribution margin to each division.
C)produces a higher company contribution margin than the cost-based approach.
D)ensures that each division manager is properly motivated and rewarded.

Question 51

The negotiated transfer price approach should be used when

A)the selling division has available capacity and is willing to accept less than the market price.
B)an outside market for the goods does not exist.
C)no market price is available.
D)any of these situations exist.

Question 52

Assuming the selling division has available capacity, a negotiated transfer price should be within the range of

A)fixed cost per unit and the external purchase price.
B)total cost per unit and the external purchase price.
C)variable cost per unit and the external purchase price.
D)variable cost per unit and the opportunity cost.

Question 53

When a cost-based transfer price is used, the transfer price may be based on any of the following except

A)fixed cost.
B)full cost.
C)variable cost.
D)all of these may be used.

Question 54

Use the following information for questions
The following data are available for Wheels 'N Spokes Repair Shop for 2020:
$$\begin{array} { l l } \text { Repair technician's wages } & \$ 150,000 \\\text { Fringe benefits } & 50,000 \\\text { Overhead } & \underline { 80,000 } \\\text { Total } & \underline { \$ 280,000}\end{array}$$ The desired profit margin is $15 per labour hour.The material loading charge is 35% of invoice cost.It is estimated that 4,000 labour hours will be worked in 2020.

-Wheels 'N Spokes' labour charge in 2020 would be

A)$50.
B)$65.
C)$70.
D)$85.

Question 55

Time-and-material pricing would be best suited to a

A)shampoo manufacturer.
B)construction company.
C)plastic container manufacturer.
D)restaurant.

Question 56

Which of the following is true?

A)There are two approaches for determining a transfer price: cost-based and market-based.
B)If a cost-based transfer price is used, the transfer price must be based on variable cost.
C)A problem with a cost-based transfer price is that it does not provide adequate incentive for the selling division to control costs.
D)The market-based transfer price approach produces a higher total contribution margin to the company than the cost-based approach.

Question 57

Use the following information for questions
The following data are available for Wheels 'N Spokes Repair Shop for 2020:
$$\begin{array} { l l } \text { Repair technician's wages } & \$ 150,000 \\\text { Fringe benefits } & 50,000 \\\text { Overhead } & \underline { 80,000 } \\\text { Total } & \underline { \$ 280,000}\end{array}$$ The desired profit margin is $15 per labour hour.The material loading charge is 35% of invoice cost.It is estimated that 4,000 labour hours will be worked in 2020.

-In March 2020, Wheels 'N Spokes repairs a bicycle that takes three hours to repair and uses parts of $70.The bill for this repair would be

A)$244.50.
B)$289.50.
C)$304.50.
D)$349.50.

Question 58

The general formula for the minimum transfer price is: minimum transfer price equals

A)fixed cost + opportunity cost.
B)external purchase price.
C)total cost + opportunity cost.
D)variable cost + opportunity cost.

Question 59

All of the following are correct statements about the cost-based transfer price approach except that it

A)can understate the actual contribution to profit by the selling division.
B)can reduce a division manager's control over the division's performance.
C)bases the transfer price on standard cost instead of actual cost.
D)provides incentive for the selling division to control costs.

Question 60

The transfer price approach that conceptually should work the best is the

A)cost-based approach.
B)market-based approach.
C)negotiated price approach.
D)time-and-material pricing approach.

Question 61

What should be the objective(s)of a firm's transfer pricing policy?

A)Ensure a secure source of inputs at the best price possible.
B)Promote goal congruence, while maintaining divisional autonomy so that accurate performance evaluation can be made.
C)Develop a cooperative relationship between divisions, while maintaining enough competitiveness to ensure the survival of the firm.
D)Develop a pricing system that facilitates good record keeping that is acceptable under GAAP.

Question 62

Management of the Catering Company would like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for $80.The Food Division sells the product to customers for $150 per unit.The Food Division's variable cost per unit is $55 and its fixed cost per unit is $25.The Food Division has 10,000 units available capacity.What is the minimum transfer price the Food Division should accept?

A)$25
B)$55
C)$80
D)$150

Question 63

Transfers between divisions located in countries with different tax rates

A)simplify the determination of the appropriate transfer price.
B)are decreasing in number as more companies "localize" operations.
C)encourage companies to report more income in countries with low tax rates.
D)all of these are correct.

Question 64

Generally, a transfer of products between two divisions should take place if it

A)allows one division to benefit from technology developed in another division.
B)results in increased incremental income to the company as a whole.
C)increases awareness within the company of activity in the various divisions.
D)assists the management to evaluate performance of the divisions.

Question 65

In setting internal transfer prices, the maximum price that the purchasing division would accept is

A)a price that will result in a profit to the selling division.
B)a price that will result in a profit to the purchasing division.
C)its variable cost of the product plus opportunity costs gained by the transfer.
D)its external cost to purchase the product.

Question 66

What would be a legitimate reason for upper management to insist on an internal transfer even though the product could be sourced outside the company at a price that is lower than the company's variable cost?

A)Management is concerned that its manufacturing equipment will soon be obsolete, and it wants to get full use out of it before it happens.
B)Management wants to ensure a secure supply of the product.
C)The company has excess capacity.
D)There is never a legitimate reason that justifies an internal transfer if a product can be sourced outside the company at a price that is lower than the company's variable cost.

Question 67

Use the following information to answer questions
Division A produces a product that it sells to the outside market.It has compiled the following:
$$\begin{array} { l l } \text { Variable manufacturing cost per unit } & \$ 10 \\\text { Variable selling costs per unit } & \$ 3 \\\text { Total fixed manufacturing costs } & \$ 150,000 \\\text { Total fixed selling costs } & \$ 30,000 \\\text { Per unit selling price to outside buyers } & \$ 40 \\\text { Capacity in units per year } & 30,000\end{array}$$

-Division B of the same company is currently buying an identical product from an outside provider for $38 per unit.It wishes to purchase 5,000 units per year from Division A.Division A is currently selling 26,000 units of the product per year.If the internal transfer is made, Division A will not incur any selling costs.What would be the minimum transfer price per unit that Division A would be willing to accept?

A)$10.00
B)$14.60
C)$16.00
D)$40.00

Question 68

Why is transfer pricing important?

A)It plays a key role in determining the ultimate profitability of the company as a whole.
B)It plays a key role in determining the profitability of the division that sells the product.
C)It plays a key role in determining the profitability of the division that buys the product.
D)It plays a key role in determining the profitability of both the selling and buying divisions of the company.

Question 69

Opportunity cost

A)is the value of another option that must be given up in order to achieve the first option.
B)must be subtracted from the variable production cost to determine the minimum transfer price on an internal transfer.
C)must be considered in determining the transfer price only when the company has sufficient excess capacity to meet demand.
D)refers to the fixed cost applied to products that are transferred between divisions.

Question 70

Use the following information for questions
The Wood Division of Fir Products, Inc.manufactures wood mouldings and sells them externally for $110.Its variable cost is $40 per unit, and its fixed cost per unit is $14.Fir's president wants the Wood Division to transfer 5,000 units to another company division at a price of $54.
Assuming the Wood Division has available capacity of 5,000 units, the minimum transfer price it should accept is

A)$14.
B)$40.
C)$54.
D)$110.

Question 71

Use the following information to answer questions
Division A produces a product that it sells to the outside market.It has compiled the following:
$$\begin{array} { l l } \text { Variable manufacturing cost per unit } & \$ 10 \\\text { Variable selling costs per unit } & \$ 3 \\\text { Total fixed manufacturing costs } & \$ 150,000 \\\text { Total fixed selling costs } & \$ 30,000 \\\text { Per unit selling price to outside buyers } & \$ 40 \\\text { Capacity in units per year } & 30,000\end{array}$$

-Division B of the same company is currently buying an identical product from an outside provider for $38 per unit.It wishes to purchase 5,000 units per year from Division A.Division A is currently selling 30,000 units of the product per year.If the internal transfer is made, Division A will not incur any selling costs.What would be the minimum transfer price per unit that Division A would be willing to accept?

A)$10
B)$11
C)$38
D)$40

Question 72

Management of the Catering Company would like the Food Division to transfer 10,000 cans of its final product to the Restaurant Division for $80.The Food Division sells the product to customers for $150 per unit.The Food Division's variable cost per unit is $55 and its fixed cost per unit is $25.The Food Division is currently operating at full capacity.What is the minimum transfer price the Food Division should accept?

A)$25
B)$55
C)$80
D)$150

Question 73

Use the following information to answer questions
Division A produces a product that it sells to the outside market.It has compiled the following:
$$\begin{array} { l l } \text { Variable manufacturing cost per unit } & \$ 10 \\\text { Variable selling costs per unit } & \$ 3 \\\text { Total fixed manufacturing costs } & \$ 150,000 \\\text { Total fixed selling costs } & \$ 30,000 \\\text { Per unit selling price to outside buyers } & \$ 40 \\\text { Capacity in units per year } & 30,000\end{array}$$

-Division B of the same company is currently buying an identical product from an outside provider for $38 per unit.It wishes to purchase 5,000 units per year from Division A.Division A is currently selling 25,000 units of the product per year.If the internal transfer is made, Division A will not incur any selling costs.What would be the minimum transfer price per unit that Division A would be willing to accept?

A)$10
B)$11
C)$38
D)$40

Question 74

In setting internal transfer prices, the minimum price that the selling division would accept is

A)a price that will result in a profit to the selling division.
B)a price that will result in a profit to the purchasing division.
C)its variable cost of the product plus opportunity costs lost by the transfer.
D)its variable cost plus an internal profit margin.

Question 75

The maximum transfer price from the buying division's standpoint is the

A)total cost + opportunity cost.
B)variable cost + opportunity cost.
C)external purchase price.
D)external purchase price + opportunity cost.

Question 76

All of the following are correct statements about transfers between divisions located in countries with different tax rates except that

A)differences in tax rates across countries complicate the determination of the appropriate transfer price.
B)many companies prefer to report more income in countries with low tax rates.
C)companies must pay income tax in the country where income is generated.
D)a decreasing number of transfers are between divisions located in different countries.

Question 77

Use the following information to answer questions
Division A produces a product that it sells to the outside market.It has compiled the following:
$$\begin{array} { l l } \text { Variable manufacturing cost per unit } & \$ 10 \\\text { Variable selling costs per unit } & \$ 3 \\\text { Total fixed manufacturing costs } & \$ 150,000 \\\text { Total fixed selling costs } & \$ 30,000 \\\text { Per unit selling price to outside buyers } & \$ 40 \\\text { Capacity in units per year } & 30,000\end{array}$$

-Division B of the same company is currently buying an identical product from an outside provider for $38 per unit.It wishes to purchase 5,000 units per year from Division A.Division A is currently selling 25,000 units of the product per year.If the internal transfer is made, Division A will not incur any selling costs.What would be the maximum transfer price per unit that Division B would be willing to accept?

A)$10
B)$11
C)$38
D)$40

Question 78

What legitimate reason might management have for insisting that one of its divisions buy a part from another division within the same company even though the buying division could source the part at a lower price externally?

A)It wants to make use of excess capacity in the seller's division.
B)It is concerned about the external supplier's ability to deliver the part on a timely basis.
C)It wants to make use of excess capacity in the buyer's division.
D)There is never a legitimate reason that justifies ordering a division to buy internally when it could source the product cheaper externally.

Question 79

Use the following information for questions
The Wood Division of Fir Products, Inc.manufactures wood mouldings and sells them externally for $110.Its variable cost is $40 per unit, and its fixed cost per unit is $14.Fir's president wants the Wood Division to transfer 5,000 units to another company division at a price of $54.
Assuming the Wood Division does not have any available capacity, the minimum transfer price it should accept is

A)$14.
B)$40.
C)$54.
D)$110.

Question 80

Use the following information to answer questions
Division A produces a product that it sells to the outside market.It has compiled the following:
$$\begin{array} { l l } \text { Variable manufacturing cost per unit } & \$ 10 \\\text { Variable selling costs per unit } & \$ 3 \\\text { Total fixed manufacturing costs } & \$ 150,000 \\\text { Total fixed selling costs } & \$ 30,000 \\\text { Per unit selling price to outside buyers } & \$ 40 \\\text { Capacity in units per year } & 30,000\end{array}$$

-Division B of the same company is currently buying an identical product from an outside provider for $38 per unit.It wishes to purchase 5,000 units per year from Division A.Division A is currently selling 25,000 units of the product per year.If the internal transfer is made, Division A will not incur any selling costs.At what price would the internal transfer occur?

A)at the lowest price that is acceptable to Division A
B)at the maximum price that is acceptable to Division B
C)It depends on the negotiation skills of the division managers.
D)No transfer will occur.