The Most Valid Reason for Using Something Other Than a Full-Cost-Based

question 152

Multiple Choice

The most valid reason for using something other than a full-cost-based transfer price between units of a company is because a full-cost price

• A)is typically more costly to implement.
• B)does not ensure the control of costs of a supplying unit.
• C)is not available unless market-based prices are available.
• D)does not reflect the excess capacity of the supplying unit.

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Definitions:

Insurance Companies

Organizations that provide financial protection and compensation for losses to individuals and entities in exchange for premiums.

Adverse Selection

A situation where asymmetric information leads to the selection of undesirable alternatives in transactions, commonly seen in insurance markets.

Insurance Companies

Organizations that provide insurance policies to consumers, covering a variety of risks in exchange for premiums.

Insurance Company

A business entity that provides financial protection against losses and risks in exchange for premiums.