A transfer price is the internal price charged when one division or business unit of a company provides goods or services to another. A common method for establishing this price is the cost-plus approach, where the cost incurred by the providing division (e.g., logistics) is calculated and a markup is added. This resulting figure becomes the transfer price, which is used for internal accounting and performance measurement. The scenario described in the question perfectly aligns with the definition of a cost-plus transfer price.

B. Productivity cost: This term refers to the economic cost of lost output or efficiency, not a price set for an internal service.

C. Operational price: This is not a standard or recognized term in managerial accounting or supply chain management for this type of internal transaction.

D. Professional supply cost: This is a non-standard, vague term that does not accurately describe the specific pricing mechanism in the question.

1. Drury

C. (2018). Management and Cost Accounting (10th ed.). Cengage Learning EMEA. In Chapter 21

transfer pricing is defined as the price at which goods or services are transferred between divisions within the same organization. The cost-plus method is detailed as a primary approach where the transfer price is set at the supplying division's cost plus a profit markup.

2. Garrison

R. H.

Noreen

E. W.

& Brewer

P. C. (2021). Managerial Accounting (17th ed.). McGraw-Hill Education. Chapter 11

"Performance Measurement in Decentralized Organizations

" explains that transfer prices can be set at cost or cost plus a markup for the selling division. This aligns with the question's description of "costs... plus an added value or markup."

3. OpenStax. (2019). Principles of Accounting

Volume 2: Managerial Accounting. Rice University. Chapter 10.4

"Explain and Demonstrate How to Use Transfer Pricing for Divisions." Retrieved from https://openstax.org/books/principles-accounting-volume-2-managerial-accounting/pages/10-4-explain-and-demonstrate-how-to-use-transfer-pricing-for-divisions. This source explicitly states

"A transfer price is the internal selling price... One of the simplest is the cost-based approach... the product is transferred at the variable cost

the full absorption cost

or the cost plus a markup."