When Considering Setting the Transfer Price at the Market Price

question 8

Multiple Choice

When considering setting the transfer price at the market price of a product similar to the intermediate good that is already available on the market

• A)It is appropriate to ignore that the market price includes a margin above marginal cost
• B)It is OK if the product on the market includes costly features your downstream division does not use
• C)Consider whether the product on the market is inexpensive because its quality is lower than you use
• D)if it is similar enough,it is justification for you producing it in-house

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Definitions:

Other Income

Comprises earnings from sources other than the main business activities, such as interest, dividends, or rental income.

Accounts Payable

Money owed by a company to its creditors for goods and services purchased on credit.

Bank Reconciliation

The process of matching and comparing figures from the accounting records against those shown on a bank statement to ensure they align.

Balance Per Books

The ending balance on a company's financial records for a specific account, before any adjustments for reconciliation.