When One Responsibility Center Uses a Transfer Price to Transfer

question 128

Short Answer

When one responsibility center uses a transfer price to transfer goods or services to another responsibility center a ___________________________________ is created.

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Definitions:

Standard Labour Cost

The predetermined cost assigned to labor based on expected productivity rates and wage rates.

Direct Labour

The labor costs associated directly with the manufacture of goods, including the wages of workers who are actively involved in the production process.

Standard Cost

The predetermined cost of manufacturing a single unit or a number of product units during a specific period, used for budgeting and performance evaluation.

Budget

A financial plan that estimates income and expenditure for a specific period of time.