TRUE OR FALSE

1. A transfer price should be set equal to the difference between the variable cost and the selling price per unit.

2. A transfer price is charged for goods and services sold to outside customers.

3. In most cases, a company sets the price instead of it being set by the competitive market.

4. In a competitive market, a company is forced to act as a price taker and must emphasize minimizing and controlling costs.

5. If the transfer price is high, it would result in a high profit of the selling division and low profit for the buying division.

6. Sales volume lays a large role in determining per unit costs in the cost-plus pricing approach.

7. When a division is operating at capacity, the transfer price to other division includes an element of opportunity cost.

8. The cost-plus pricing approach establishes a cost base and adds a markup to this base to determine a target selling price.

9. The market-based transfer price approach produces a higher total contribution margin to the company than the cost-based approach.

10. A price is set by the competitive market in the case where the product is specially made for a customer.