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When a supplying profit center is operating at full capacity, the minimum transfer price should be:____.
A. Enough to cover all fixed and variable per-unit costs.
B. Enough to cover all variable per-unit costs and any contribution margin lost by dropping customers.
C. Enough to cover all variable per-unit costs.
D. Enough to generate a reasonable gross profit.

Sagot :

Answer:

B. Enough to cover all variable per-unit costs and any contribution margin lost by dropping customers.

Explanation:

As the supplying profit center would be run at the full capacity and earn the profit from selling outside to the customer at full capacity so here the supplying center would have to provide the unit to the other center so it would involve the profit because of the internal transfer and the same should be involved in the transfer price as it would be worked on the full capacity

Therefore the option b is correct

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