Asked by Muhammad Tayyab on Sep 24, 2024
Verified
If products similar to the intermediate good can be bought externally,an approximation of the correct transfer price is
A) average costs
B) average fixed costs
C) average variable costs
D) the market price
Intermediate Good
Goods that are used in the production process to produce final goods or services.
Average Costs
The total costs divided by the quantity produced or consumed, indicating the cost per unit.
- Discern the aspects to be considered in the determination of transfer prices.
Verified Answer
YL
Yailin Llerandi3 days ago
Final Answer :
D
Explanation :
The correct transfer price in this scenario would be the market price. This is because if similar products can be bought externally, the market price would determine the price at which the intermediate good can be bought and sold. Choosing any of the other options such as average costs or fixed costs would not accurately reflect the market value of the intermediate good.
Learning Objectives
- Discern the aspects to be considered in the determination of transfer prices.