The General Principle on Setting Transfer Prices That Are in the Organization's

question 31

Multiple Choice

The general principle on setting transfer prices that are in the organization's best interests is:

• A) outlay cost plus opportunity cost of the resource at the point of transfer.
• B) variable costs plus opportunity cost of the resource at the point of transfer.
• C) lost contribution margin less the allocated fixed costs for the selling division.
• D) gross margin for the buying division plus the gross margin for the selling division.

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Definitions:

Custom Window Treatments

Specifically designed coverings for windows, tailored to individual preferences and measurements.

Job Order Costing

An accounting method used to track the production costs for specific jobs or batches, identifying the direct materials, direct labor, and overhead per job.

Process Costing

A costing method used by companies that produce similar or identical units of product in batches employing a consistent process.

Home Construction

The process of building or assembling a residential dwelling, which involves planning, design, obtaining permits, and actual construction activities.