Midland Incorporated Has Two Divisions: Production and Marketing, Which It

question 79

Essay

Midland Incorporated has two divisions: Production and Marketing, which it treats as profit centers. Because the Production Division has no marketing capabilities, it does not have a traditional market price to consider and the company does not want to use negotiation.
Required:
Discuss the following cost-based transfer prices along with problems that might exist for each.
a) Standard cost.
b) Full absorption cost.
c) Actual cost.

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Definitions:

Judgment Goals

The objectives or outcomes that individuals aim to achieve or satisfy through their evaluative processes.

Nomothetic Goals

Goals that are concerned with establishing general laws and traits that apply broadly across people, in contrast to idiographic goals which are highly individualized.

Operant Conditioning

A learning process in which the strength of a behavior is modified by reinforcement or punishment.

B.F. Skinner

An American psychologist and behaviorist known for his theory of operant conditioning and studies on reinforcement.