One reason companies use full-cost transfer pricing is that it provides
A) relevant costs for long-run decisions even though poor short-run decisions may result.
B) relevant costs for long-run decisions and for short-run decisions.
C) relevant costs for short-run decisions and poor for long-run decisions.
D) relevant costs for short-run decisions at the expense of the company.
E) relevant costs for long-run decisions and for employee staffing decisions.

Question

Quizplus · Accepted Answer

Full-cost transfer pricing includes all relevant costs, including fixed costs, which may not change in the short run. This can provide accurate information for long-run decisions, but may not reflect the true cost for short-run decisions. Therefore, full-cost transfer pricing is suitable for long-run decisions, but may lead to poor short-run decisions.

One Reason Companies Use Full-Cost Transfer Pricing Is That It