A transfer price set as 135 percent of absorption costs is an example of a
A) Market pricing agreement
B) Cost-plus approach
C) Dual pricing approach
D) Replacement cost approach

Question

Quizplus · Accepted Answer

The cost-plus approach involves setting the transfer price at a markup over the cost of production. In this case, setting the transfer price at 135 percent of absorption costs is an example of adding a markup to the base cost, which aligns with the cost-plus approach.

A Transfer Price Set as 135 Percent of Absorption Costs