Which of the Following Types of Transfer Prices Do NOT

question 27

Multiple Choice

Which of the following types of transfer prices do NOT encourage the selling division to be efficient?

• A)transfer prices based upon market prices
• B)transfer prices based upon actual costs
• C)transfer prices based upon standard costs
• D)transfer prices based upon standard costs plus a markup for profit

---

Definitions:

American Producers

Businesses or individuals in the United States that create or provide goods and services.

Oil Imports

The purchase of petroleum from foreign countries, essential for economies that consume more oil than they produce domestically.

Comparative Advantage

is the economic theory that a country should specialize in producing and exporting goods and services for which it has the lowest opportunity cost.

Opportunity Cost

The cost of forgoing the next best alternative when making a decision.