A Transfer Price Based on the Full Cost Plus a Markup

question 134

Multiple Choice

A transfer price based on the full cost plus a markup may lead to suboptimal decisions because ________.

• A) it leads the buying division to regard the fixed costs and the markup of the selling division as a variable cost
• B) it leads the buying division to regard the variable costs and the markup of the selling division as a fixed cost
• C) it leads the buying division to regard the fixed costs and the markup of the selling division as total costs
• D) it leads the buying division to regard the variable costs and the markup of the selling division as total costs

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Definitions:

Triarchic Theory

A theory of intelligence that posits three aspects of intelligent behavior: analytical, creative, and practical intelligence, as formulated by psychologist Robert J. Sternberg.

Analytical Intelligence

The aspect of intelligence that involves the ability to analyze, evaluate, judge, compare, and contrast.

Architect

A professional who designs buildings and in many cases also supervises their construction.

Multiple Intelligences

A theory by Howard Gardner suggesting individuals possess various forms of intelligence, including linguistic, logical-mathematical, musical, spatial, bodily-kinesthetic, interpersonal, intrapersonal, and naturalistic.