Which of the Following Statements About Cost-Based Transfer Prices Is/are

question 90

Multiple Choice

Which of the following statements about cost-based transfer prices is/are true?
i. A transfer price set at standard variable cost plus a mark-up provides an incentive for the supplying business to make the transfer.
ii. Absorption cost-based transfer prices are good for the company as a whole because all costs are considered.
iii. Transfer prices should be based on standard costs rather than actual costs since the cost of inefficiency should not be passed on.

• A) i and ii
• B) ii and iii
• C) i and iii
• D) All of the given answers

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Definitions:

Short-Term Financial Plan

A strategy focusing on managing current liabilities and assets to meet short-term operational and financial goals.

External Financing

Funding acquired from sources outside the company, such as loans, stock issues, or bonds.