A negotiated transfer pricing system is set up where

Select one:

a. none of the options are correct

b. the two sides cannot agree on a price and the difference between the two sides is absorbed by the home office

c. the two sides agree to use a cost basis for transfer pricing

d. a ready market price is not available and the two sides must come up with an agreeable price

e. the buyer buys at variable cost and the seller only sells at full cost

If full cost is used in transfer pricing, it is preferable to use

Select one:

a. actual full cost because the buyer is well-advised to deal with the real rather than anticipated costs

b. actual full costs because the seller is well-advised to deal with the real rather than anticipated costs

c. standard full cost because the seller does not wish to pass along the variations in cost

d. none of the options are correct

e. standard full cost because the buyer does not wish to be stuck with unknowns