A limitation of transfer prices based on actual cost is that they: (CIA adapted)
A) charge inefficiencies to the department that is transferring the goods.
B) charge inefficiencies to the department that is receiving the goods.
C) must be adjusted by some markup.
D) lack clarity and administrative convenience.

Question

Quizplus · Accepted Answer

Transfer prices based on actual cost can pass on inefficiencies from the producing department to the receiving department, as they reflect the actual costs incurred, including any inefficiencies.

A Limitation of Transfer Prices Based on Actual Cost Is