When goods are sent to the branch at cost plus mark-up; it means that the branch should sell at?

A. a price above or below the stipulated price
B. any price but not below the transfer price
C. cost price
D. a price that is equal to the mark-up

Correct Answer:

Option B – any price but not below the transfer price

Explanation

Cost-plus pricing is a pricing strategy in which the selling price is determined by adding a specific amount markup to a product’s unit cost.

Cost-plus pricing involves adding a markup to the cost of goods and services to arrive at a selling price. Under this approach, you add together the direct material cost, direct labor cost, and overhead costs for a product, and add to it a markup percentage in order to derive the price of the product.