It is recommended that standard costs be used instead of actual costs for cost-based transfer prices.

Question

Quizplus · Accepted Answer

Standard costs provide a predetermined cost figure that is agreed upon by both the buying and selling divisions. Using actual costs for cost-based transfer prices can lead to conflicts and disputes as actual costs can fluctuate based on various factors such as inflation, production inefficiencies, etc. Standard costs ensure consistent and predictable transfer prices, which benefits both the buying and selling divisions.

It Is Recommended That Standard Costs Be Used Instead of Actual