Answer (C) is correct . Full-cost price is the price usually set by an absorption-costing calculation and includes materials, labor, and a full allocation of manufacturing O/H. This full- cost price may lead to dysfunctional behavior by the supplying and receiving divisions, e.g., purchasing from outside sources at a slightly lower price that is substantially above the variable costs of internal production.
Answer (A) is incorrect because The market price is the price on the open market.
Answer (B) is incorrect because The outlay cost plus opportunity cost is the price representing the cash outflows of the supplying division plus the contribution to the supplying division from an outside sale.
Answer (D) is incorrect because The variable-cost-plus price is the price set by charging for variable costs plus a lump sum or an additional markup, but less than full markup.
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