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:

Standard Of Living

The level of wealth, comfort, material goods, and necessities available to a person, group, or society.

Per Capita Income

A measure of the average income earned per person in a given area or country.

Population Growth Rate

The rate at which the number of individuals in a population increases in a given time period as a fraction of the initial population.

Developing Economy

A nation with a lower standard of living, undeveloped industrial base, and low Human Development Index (HDI) relative to other countries.