Question

The minimum acceptable transfer price using the cost-based method is ____.

A. cost plus
B. markup
C. full cost
D. variable cost
E. fixed cost

Answer 1

The minimum acceptable transfer price using the cost-based method is the full cost of production. The correct answer is option C.

Step-by-step explanation:

When determining the transfer price, the cost-based method takes into account the full cost of production, which includes both fixed and variable costs. This ensures that the selling division recovers all costs and maintains profitability.

For example, if a company manufactures a product and wants to transfer it to another division for sale, the transfer price would be based on the full cost of producing the product.