acctg 205

This refers to the amount charged by one segment of the organization for goods/services transferred or provided to another segment of the same organization

This states that a transfer price should permit a segment to operate as an independent entity and achieve its goals while functioning in the best interests of the organization as a whole

The opportunity cost is usually the contribution margin to be lost from outside customers if the goods are transferred to a buying segment within the firm

This states that the selling segment should not lose income by selling within the company

This states that the buying segment should not incur greater costs by buying within the company

This states that if the selling segment has an excess capacity, it should be used to produce goods for transfers within the company. If no excess capacity, the selling segment should not incur loss by selling to another segment within the same organization

This states that costs to be considered in a transfer price should be analyzed and broken down into variable and fixed components, so that it would be easier to identify relevant cost items.

A transfer price equal to the prevailing market price encourages both the selling and the buying segments to sell/buy internally

Includes materials, labor, and allocated fixed factory overhead

This markup may be a lump sum (pesos) or a markup percentage. Cost may be the standard cost or actual cost