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A carpet manufacturer maintains a retail division consisting of stores stocking its brand and other brands, and a manufacturing division that makes carpets and pads. An outside market exists for carpet padding material in which all padding produced can be sold. The proper transfer price for padding transferred from the manufacturing division to the retail division is A. The market price at which the retail division could purchase padding. B. Variable manufacturing division production cost. C. Variable manufacturing division production cost plus allocated fixed factory overhead. D. Variable manufacturing division production cost plus variable selling and administrative cost.
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