A Major Advantage of Using Actual Costs for Transfer Prices

question 90

True/False

A major advantage of using actual costs for transfer prices is that often inefficiencies are NOT passed along to the receiving division.

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Definitions:

Total Surplus

The total benefits society gains, encompassed by the addition of consumer surplus and producer surplus within a market.

Consumer Surplus

The variation between the sum consumers are willing to allocate for a good or service and the sum they actually allocate.

Surplus II

An additional amount of a resource, product, or service that exceeds the amount demanded or utilized.

Consumer Surplus

The discrepancy between what consumers are willing to spend on a good or service and their actual expenditures.