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

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Definitions:

Interest

The cost of borrowing money, expressed as a percentage, paid by the borrower to the lender for the use of the lender's money.

Present Value

Today's value of a future monetary amount or cash flow series, calculated with a designated rate of return.

Interest Rate

The cost of borrowing money or the return on investment for savings, usually expressed as a percentage.

Utility Function

A mathematical representation of how different quantities of goods or services increase a consumer's satisfaction or happiness.