If a Company Adds Up All the Costs of Producing

question 19

Multiple Choice

If a company adds up all the costs of producing an intermediate product - direct labor, materials, and overhead - to establish a transfer price, then it is using:

• A) market-based transfer prices.
• B) marginal cost transfer prices.
• C) full-cost transfer prices.
• D) success monopoly transfer prices.

---

Definitions:

Incremental Approach

A decision-making process that focuses on analyzing the financial impact of small or incremental changes in operations or business activities.

Budgeting

The process of creating a plan to spend your money, outlining projected income and expenses.

Self-Imposed Budget

A budget that is created with the input and agreement of lower and middle management employees, improving commitment and enforcement.

Control

The process of monitoring and regulating operations and activities to ensure they meet certain standards or objectives.