Development of a Transfer Price Involves

question 102

Multiple Choice

Development of a transfer price involves

• A) including only costs allocated from corporate levels when determining semi-finished product line costs.
• B) direct upper management intervention if different transfer prices are determined by the selling division and the buying division.
• C) applying a target profit rate to the unit cost for the semi-finished product.
• D) heavy reliance on industry averages.

---

Definitions:

Process Inventory

Inventory that is currently in the stages of production but has not yet been completed.

Cost Reconciliation

The process of explaining the difference between the starting and ending balances of costs in a specific accounting period.

Work in Process

Materials and products that are in the middle of the production process but are not yet completed goods.

Added to Production

The process or action of incorporating additional inputs or resources into the production process to increase output.