Which of the following statements about cost-based transfer prices is/are true?
i. A transfer price set at standard variable cost plus a mark-up provides an incentive for the supplying business to make the transfer.
ii. Absorption cost-based transfer prices are good for the company as a whole because all costs are considered.
iii. Transfer prices should be based on standard costs rather than actual costs since the cost of inefficiency should not be passed on.
A) i and ii
B) ii and iii
C) i and iii
D) All of the given answers

Question

Quizplus · Accepted Answer

i. Setting a transfer price at standard variable cost plus a mark-up ensures the supplying division is compensated for its efforts, encouraging transfers. iii. Using standard costs for transfer pricing promotes efficiency by not allowing the transferring of inefficiencies' costs between divisions.

Which of the Following Statements About Cost-Based Transfer Prices Is/are