The approach that requires the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the _____ approach.
A)cost price
B)negotiated cost
C)standard cost
D)market price

Question

Quizplus · Accepted Answer

The negotiated cost approach allows divisions within a company to negotiate a transfer price that is mutually beneficial, typically setting the price above the supplying division's variable costs but below the market price of the goods or services. This approach enables both divisions to cover costs and potentially earn a profit, while also keeping transactions within the company economically viable.

The Approach That Requires the Transfer Price to Be Less