Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers?
A) Market price
B) Cost price
C) Negotiated price
D) Variable price

Question

Quizplus · Accepted Answer

When the transfer price is set at the same amount sold to outside buyers, it is referred to as a market price approach. This approach ensures that the internal transfer is at fair market value and avoids any distortion in profitability or incentives for the division involved.

Which Transfer Price Approach Is Used When the Transfer Price