Which of the following statements regarding transfer pricing is FALSE?

a. When idle capacity exists, there is no opportunity cost to producing intermediate products for another division.
b. Market-based transfer prices should be reduced by any costs avoided by selling internally rather than externally.
c. No contribution margin is generated by the transferring division when variable cost-based transfer prices are used.
d. The goal of transfer pricing is to provide segment managers with incentive to maximize the profits of their divisions.

Answer: D

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Which of the following statements regarding transfer pricing is FALSE?

Which of the following statements regarding transfer pricing is FALSE?

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