When a company uses activity-based transfer prices:
A) The internal buyer is motivated to overstate the number of units to buy internally
B) The internal buyer is motivated to understate the number of units to buy internally
C) Capacity is usually reserved for products or services that are transferred internally
D) Batch-level costs are excluded from the computation

Question

Quizplus · Accepted Answer

Activity-based transfer pricing encourages efficient use of resources by allocating costs based on actual activities and resource usage, which often includes reserving capacity for products or services transferred internally to ensure that resources are available where they are most needed.

When a Company Uses Activity-Based Transfer Prices