The primary objective in setting transfer prices is to ________.
A) establish a system that determines the best transfer prices for the company as a whole
B) evaluate the managers of the responsibility centers involved
C) achieve goal congruence by selecting a price that will maximize overall company profits
D) make it easy for managers to select prices that maximize division profits

Question

Quizplus · Accepted Answer

The primary objective in setting transfer prices is to achieve goal congruence by selecting a price that will maximize overall company profits. This means that the transfer price should be set at a level that encourages both the selling division and the buying division to act in the best interests of the company as a whole. It is not about evaluating or rewarding individual managers, nor is it about maximizing division profits without regard for the overall impact on the company.

The Primary Objective in Setting Transfer Prices Is to ________