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John Moffat.
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Noah098
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sir in case of full cost+10%=transfer price, we take into consideration fixed production overheads, but ignore fixed administration costs always, right?
because admin and selling costs would not be incurred as its an internal transfer.
Noah098
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in other words fixed administration overheads recovered through external sales only?
John Moffat
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There are no rules as to how a company fixed a transfer price.
If they choose to adopt a full cost plus approach then it will usually be based on the full production cost (and not admin and selling costs). In an exam question that is what we will assume, unless obviously the question specifically says something different.
Noah098
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