In practice,many companies use transfer prices based on ________.
A)semi-cost
B)full-cost
C)part-cost
D)half-cost
E)partial-cost

Question

Quizplus · Accepted Answer

Full-cost transfer pricing takes into account both the variable and fixed costs associated with a product or service, providing a more accurate representation of the true costs. This method ensures that the selling division covers all costs associated with producing and selling the product or service, including a fair share of overhead costs. Thus, full-cost transfer pricing is commonly used by companies to ensure a fair allocation of costs between divisions. Semi-cost, part-cost, half-cost, and partial-cost are not commonly used transfer pricing methods.

In Practice,many Companies Use Transfer Prices Based on ________