The production director of a company is concerned with the problem of measuring the efficiency of process managers. In the production department there are six processes and all products processed pass through a combination of these processes. One specific area of investigation is the measurement of output values which involves the use of transfer prices.
You have been asked by the production director to tabulate the advantages and disadvantages of using each of the following systems of transfer pricing as related to process costing:
(a) absorption cost;
(b) marginal cost;
(c) cost plus profit;
(d) standard cost.