Which of the following transfer-pricing methods is likely to be best for evaluating subunit performance in a competitive market?
A)a cost-based transfer price based on budgeted costs
B)a negotiated transfer price
C)a market-based transfer price
D)All of the above.

Question

Quizplus · Accepted Answer

A market-based transfer price is the best choice for evaluating subunit performance in a competitive market because it takes into account the supply and demand of the products or services being transferred between subunits. This method ensures that the transfer price is fair and reflects the market conditions, encouraging subunits to optimize their performance to remain competitive. Cost-based transfer prices and negotiated transfer prices may not reflect the true market value of the goods or services, potentially distorting the evaluation of subunit performance.

Which of the Following Transfer-Pricing Methods Is Likely to Be