What Transfer Pricing Mechanism Generally Applies a Normal Markup to Costs

question 28

Multiple Choice

What transfer pricing mechanism generally applies a normal markup to costs as a surrogate for market prices when intermediate market prices are not available?

• A)Fixed price-based transfer pricing
• B)Full-absorption costing
• C)Activity-based costing
• D)Cost-plus transfer pricing

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Definitions:

Cartels

Agreements among competing firms in an industry to control prices, limit production, or divide markets, with the goal of maximizing collective profits.

Herfindahl-Hirschman Index

A measure of concentration calculated as the sum of the squares of the market share of each firm in an industry.

Largest Firm

The organization within a particular industry or market that has the highest revenue, market share, or workforce size.

Market Share

The percentage of an industry's total sales that is earned by a particular company over a specified time period.