To evaluate the performance of individual departments,interdepartmental transfers of a product should preferably be made at prices
A)equal to the market price of the product.
B)set by the receiving department.
C)equal to fully-allocated costs of the producing department.
D)equal to variable costs to the producing department.

Question

Quizplus · Accepted Answer

Interdepartmental transfers should be made at prices equal to the market price of the product to ensure that the receiving department is paying the same price as external customers. This also provides an incentive for the producing department to operate efficiently and produce high-quality products at a competitive price. Options B, C, and D do not reflect the actual market value of the product and may not accurately evaluate departmental performance.

To Evaluate the Performance of Individual Departments,interdepartmental Transfers of a Product