The Molding Department of Acadia Corporation is a cost center. The transfer price used to transfer goods from the Molding Department to the Assembly Department would most likely be based upon:

Question

Quizplus · Accepted Answer

Since the Molding Department is a cost center, the transfer price would most likely be based on the cost of the units being transferred. This would ensure that the Assembly Department is charged the appropriate amount for the cost incurred by the Molding Department in producing the goods. Transferring at market value or a negotiated amount may not necessarily reflect the actual cost incurred by the Molding Department. Average fixed cost per unit is not relevant to transfer price.

The Molding Department of Acadia Corporation Is a Cost Center