Asked by Taira DeSutter on Jul 28, 2024
Verified
Transfer prices should not be based on actual costs because:
A) inefficient producing divisions have higher costs of production, which would be passed on by buying divisions.
B) producing divisions have no incentives to control costs.
C) inefficient units with high costs of production have no opportunity for profit.
D) inefficient producing divisions have higher costs of production, which would be passed on by buying divisions AND producing divisions have no incentives to control costs.
Actual Costs
The real costs incurred in the production of goods or services, including all direct and indirect expenses.
Inefficient Divisions
Parts of an organization that operate with lower productivity or effectiveness compared to expected standards.
Production Costs
The total expense involved in manufacturing goods, including raw materials, labor, and overhead costs.
- Comprehend the fundamentals and consequences of transfer pricing in a corporate setting.
Verified Answer
Learning Objectives
- Comprehend the fundamentals and consequences of transfer pricing in a corporate setting.
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