Midland Incorporated has two divisions: Production and Marketing, which it treats as profit centers. Because the Production Division has no marketing capabilities, it does not have a traditional market price to consider and the company does not want to use negotiation.
Required:
Discuss the following cost-based transfer prices along with problems that might exist for each.
a) Standard cost.
b) Full absorption cost.
c) Actual cost.

Question

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The Answer of Midland Incorporated has two divisions: Production and Marketing, which it treats as profit centers. Because the Production Division has no marketing capabilities, it does not have a traditional market price to consider and the company does not want to use negotiation.
Required:
Discuss the following cost-based transfer prices along with problems that might exist for each.
a) Standard cost.
b) Full absorption cost.
c) Actual cost.

Midland Incorporated Has Two Divisions: Production and Marketing, Which It