An advantage of absorption cost transfer pricing arises from the fact that Select one: A. This method keeps the purchasing division content. B. This method encourages the selling division to operate efficiently. C. This method allows the selling division to make a contribution toward covering long run fixed costs. D. This method is not as easy to implement as other methods.

This method encourages the selling division to operate efficiently.

Explanation:

Absorption cost transfer pricing is very essential to determine the right amount in which goods and services will be sold in the market. It involves setting a price for a particular product with inclusion of all its variable costs.

Absorption cost transfer pricing enables an organization to maximise profit this is because all the different cost incurred during production are added to the price of the product.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation: