Under What Condition Does the IRS Consider the Resale Price

question 50

Multiple Choice

Under what condition does the IRS consider the resale price method acceptable as a transfer price?

• A) The subsidiary is a foreign controlled corporation.
• B) The related party is merely a distributor of finished goods.
• C) The divisions are part of a decentralized organization.
• D) There is no market price upon which to base the transfer price.

---

Definitions:

Activity-Based Costing

A costing methodology that assigns costs to products and services based on the activities that go into producing them, with the aim of providing more accurate product cost information.

Activity Drivers

Factors that cause changes in the costs of activities, used to allocate costs in activity-based costing accurately.

Direct Labor Hours

The total number of hours worked by employees directly involved in the production process of a company's goods or services.

Activity-Based Costing

A costing methodology that assigns costs to products or services based on the resources they consume, focusing on activities as the fundamental cost drivers.