IMANET Exam CMA Topic 5 Question 38 Discussion

Actual exam question for IMANET's Certified Management Accountant exam

Question #: 38
Topic #: 5

[All Certified Management Accountant Questions]

A proposed transfer price may be based upon the full-cost price Full-cost price is the

price

AOn the open market.

BRepresenting the cash outflows of the supplying division plus the contribution to the supplying division from an outside sale.

CUsually set by an absorption-costing calculation

DSet by charging for variable costs plus a lump sum or an additional markup, but less than full markup

Show Suggested Answer

Suggested Answer: C

Full-cost price is the price usually set by an absorption-costing calculation and includes materials, labor, and a full allocation of manufacturing O/H. This full-cost price may lead to dysfunctional behavior by the supplying and receiving divisions, e g., purchasing from outside sources at a slightly lower price that is substantially above the variable costs of internal production.

by Arthur at May 03, 2022, 01:38 PM

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