Price Setting Flashcards
1
Q
What is a transfer price?
A
The price at which goods or services are transferred between different units of the same company
2
Q
What is the minimum transfer price per unit?
A
Incremental cost per unit plus the transferring unit’s opportunity cost per unit
3
Q
What is the maximum transfer price per unit?
A
The lesser of:
Receiving unit’s incremental contribution per unit (before subtracting transfer price) AND
The market price at which the receiving unit can purchase each unit of product
