When a Cost-Based Transfer Price Is Used, the Transfer Price

question 16

Multiple Choice

When a cost-based transfer price is used, the transfer price may be based on any of the following except

• A)fixed cost.
• B)full cost.
• C)variable cost.
• D)all of these may be used.

---

Definitions:

Nonrival

Refers to a good where one person's use does not reduce the amount available for others.

Nonexcludable

A characteristic of goods where it is difficult or impossible to prevent people from using the good once it has been provided.

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they are available to every individual without diminishing availability to others, such as national defense, public parks, and clean air.

Marginal Social Benefit

The additional benefit that society receives from the consumption of an additional unit of a good or service.