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Sir i also don’t understand why the following statement is false, when it should be true,
“the market price acts as an incentive to use up any spare capacity in the selling division of a company”
now my understanding is that generally VCs and FCs or total costs in other words are way lower than Market price, so if the buying division agrees to pay the market price the selling division will obviously be happy about this. But I also understand the other side of the coin, that due to several competitive forces of market demand and supply company may be barely able to cover its costs with a low markup and hence would be better off wiht a full cost+profit% transfer price. But then this is very contentious. So could you clarify?
thank you sir!
I cannot comment on a statement out of context – I need to see the whole question.
If it is a question from the current edition of the BPP Revision Kit then please tell me the number of the question. If it is a past exam question then please tell me which question and which exam.
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