When a company uses activity-based transfer prices:
A) The internal buyer is motivated to understate the number of units to buy internally
B) Capacity is usually reserved for products or services that are transferred internally
C) The internal buyer is motivated to overstate the number of units to buy internally
D) Batch-level costs are excluded from the computation

Question

Quizplus · Accepted Answer

Activity-based transfer pricing encourages efficient use of resources by allocating costs based on actual activities, which often leads to reserving capacity for internally transferred products or services to ensure that the internal supply chain operates efficiently.

When a Company Uses Activity-Based Transfer Prices