If the market price of a good is below the minimum transfer price, the buying profit center should:
A) Negotiate a lower transfer price
B) Accept the transfer price: the money all stays in the company anyways
C) Not engage in the transfer, but rather buy from outside suppliers
D) Accept the transfer price and charge a higher selling price
E) None of the above

Question

Quizplus · Accepted Answer

When the market price of a good is below the minimum transfer price, it is more cost-effective for the buying profit center to purchase the good from outside suppliers rather than engaging in an internal transfer at a higher price. This approach maximizes the profit center's cost efficiency and overall profitability.

If the Market Price of a Good Is Below the Minimum