Litwak Inc. 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.
1) Standard unit-level cost
2) Absorption (full) cost
3) Actual cost

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The Answer of Litwak Inc. 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.
1) Standard unit-level cost
2) Absorption (full) cost
3) Actual cost