Cost-based transfer prices are often used when markets for the product are not competitive or when the quality of the internal product is different from the externally available products.

Question

Quizplus · Accepted Answer

Cost-based transfer prices are used in situations where market competition is limited, making it difficult to determine a fair price for a product. Additionally, when there are quality differences between the internal product and externally available products, using cost-based transfer prices can ensure that the internal product is priced appropriately based on its cost structure.

Cost-Based Transfer Prices Are Often Used When Markets for the Product