Asked by Marijsha McNeal on Sep 24, 2024
A problem with using the price of a product similar to the intermediate good sold on the market is
A) the market price includes a margin above marginal cost
B) the product on the market may include costly features your downstream division does not use
C) the product on the market may be cheap because it is not as high of quality as your downstream division uses
D) all of the above
Market Price
The current price at which an asset or service can be bought or sold in the market.
Marginal Cost
The increase in total production costs resulting from the production of one additional unit of a product or service.
Downstream Division
Part of a company involved in the final processing, distribution, or selling of a product.
- Understand the complications involved in utilizing external market prices to establish transfer prices.
Learning Objectives
- Understand the complications involved in utilizing external market prices to establish transfer prices.