Hasslehoff Inc.is a multinational company with divisions around the world.Division A in the United States purchases a part from Division G in Canada.There is no outside market for the part because it is used to manufacture another product.The manufacturing cost for the part is $5.Transportation is $1,and commissions are $0.50 but do not need to be paid. What is the transfer price using the cost-plus method?
A)$5.00
B)$5.50
C)$6.00
D)$6.50

Question

Quizplus · Accepted Answer

The cost-plus method calculates the transfer price by adding a markup to the cost of the product. Here, the manufacturing cost is $5, transportation is $1, and commissions are $0.50 (which are not paid). So, the total cost is $5 + $1 = $6. The question does not specify a markup percentage, so the transfer price is the total cost, which is $6.