All of the Following Are True of Cost-Based Transfer Prices

question 146

Multiple Choice

All of the following are true of cost-based transfer prices except:

• A) They generally promote optimal decision-making from the standpoint of the organization as a whole.
• B) They may be based either on actual costs or standard (i.e., budgeted) costs.
• C) Their use may not provide proper motivation for cost control on the part of the producing division.
• D) They may not provide proper guidance when opportunity costs exist.
• E) Generally speaking, such cost data are readily available.

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Definitions:

Stock Exchange

A stock exchange is a marketplace where securities, such as stocks and bonds, are bought and sold, facilitating capital exchange between investors and companies.

Demand

The desire, willingness, and ability of consumers to purchase goods or services at a given price.

Junk Bond

A high-risk, high-yield bond issued by companies considered to be at greater risk of defaulting on their debt obligations.

Corporate Bond

A debt security issued by a corporation to raise funding, offering periodic interest payments and the return of the principal at maturity.