A benefit of using a market-based transfer price is the:
A)profits of the transferring division are sacrificed for the overall good of the corporation
B)profits of the division receiving the products are sacrificed for the overall good of the corporation
C)economic viability and profitability of each division can be evaluated individually
D)None of these answers is correct.

Question

Quizplus · Accepted Answer

A market-based transfer price allows the economic viability and profitability of each division to be evaluated individually, as the transfer price is based on market prices and reflects the actual cost to the receiving division. This can help to ensure that each division is being fairly compensated and encourage efficient resource allocation within the organization. Choices A and B are incorrect because a market-based transfer price should not sacrifice the profits of either division for the overall good of the corporation. Choice D is incorrect because there is a benefit to using a market-based transfer price, as explained above.

A Benefit of Using a Market-Based Transfer Price Is The