Which Statement Is True Concerning the Establishment of Transfer Prices

Multiple Choice

Which statement is true concerning the establishment of transfer prices?

A) If the selling division is operating at capacity,the transfer price should be the sum of fixed and variable costs of production.
B) If the selling division has idle capacity,and the idle facilities cannot be used for other purposes,the transfer price should be at least the variable costs of production.
C) If the selling division is operating below capacity,the transfer price should be discounted.
D) None of the answers is correct.