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:

Striver

An individual who is determined to succeed and improve their social or economic status, often through hard work and ambition.

VALS Typology

A proprietary research methodology used for psychographic market segmentation and consumer profiling.

Ethical Code

A set of principles designed to guide behavior in accordance with moral standards and integrity.

Believers

Individuals who accept or trust in something without requiring empirical evidence, often used in the context of religious faith.