It is recommended that budgeted or standard costs be used instead of actual costs for cost-based transfer prices.

Question

Quizplus · Accepted Answer

Budgeted or standard costs are used for cost-based transfer pricing to eliminate the possibility of one division taking advantage of another through inflated or deflated costs. Actual costs may not accurately reflect the true cost of production and can lead to unfair transfer pricing.

It Is Recommended That Budgeted or Standard Costs Be Used