If a company adds up all the costs of producing an intermediate product - direct labor,materials,and overhead - to establish a transfer price,then it is using a:
A)market-based transfer price.
B)marginal-cost transfer price.
C)full-cost transfer price.
D)monopoly transfer prices.

Question

Quizplus · Accepted Answer

A full-cost transfer price takes into account all the costs associated with producing a product, including direct labor, materials, and overhead. This type of transfer price is used when the intermediate product is not sold on the open market but is transferred between different parts of the same company. Other types of transfer prices, such as market-based transfer prices and marginal-cost transfer prices, may be more appropriate when selling goods on the open market or when there is competition among suppliers. Monopoly transfer prices are not a recognized type of transfer price.

If a Company Adds Up All the Costs of Producing