A General Calculation Method for Transfer Prices That Achieves Goal

question 57

Multiple Choice

A general calculation method for transfer prices that achieves goal congruence begins with the additional outlay cost per unit incurred because goods are transferred and then

• A)adds the opportunity cost per unit to the organization because of the transfer.
• B)subtracts the opportunity cost per unit to the organization because of the transfer.
• C)adds the sunk cost per unit to the organization because of the transfer.
• D)subtracts the sunk cost per unit to the organization because of the transfer.
• E)adds the sales revenue per unit to the organization because of the transfer.

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Definitions:

Variable Costs

Expenses that change in proportion to the activity of a business, such as utility costs that increase with higher production levels.

Fixed Costs

Costs that remain constant regardless of how much is produced or sold, including expenses like rent, salaries, and insurance.

Relevant Range

The span of activity or volume where the specific assumptions of cost behavior are considered valid.

Break-even Point

The level of production or sales at which total revenues equal total costs, resulting in neither profit nor loss.