Concept:"Cost plus mark up" means the head office adds a fixed profit margin to the cost price before sending the goods to the branch.
This combined amount becomes the transfer price or the minimum selling price for the branch.
Explanation:The transfer price is made up of the cost of the goods plus the agreed mark up.
The head office expects this transfer price to cover the cost and yield the planned profit when the goods are sold.
The branch is therefore allowed to sell at any price that is not lower than the transfer price.
Selling below the transfer price would reduce the expected profit or even cause a loss on the branch transaction.
Selling at cost price or at the mark up alone would not cover the full amount charged to the branch.
Thus, the branch must ensure its selling price is at least equal to the transfer price.
Answer:B. Any price but not below the transfer price