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

question 54

True/False

If a cost-based transfer price is used, the transfer price must be based on variable cost.

---

Definitions:

Perfect Hedge

A perfect hedge is an investment position that completely eliminates the risk of another investment through a counterbalancing act, typically through derivatives like options or futures contracts.

Hedger

An individual or entity that enters into contracts such as futures or options to offset the risk of price movements in the commodities or securities markets.

Prices Change

The fluctuation in the market price of goods, services, or securities over time due to various economic factors.

Put Option

A put option is a financial contract giving the holder the right, but not the obligation, to sell a specific amount of an asset at a predetermined price within a specific time frame.