What is the best transfer price when the transferred product has a competitive outside market?
A)the cost-based price
B)the negotiated price
C)the market price
D)the price set by central management

Question

Quizplus · Accepted Answer

When the transferred product has a competitive outside market, the best transfer price is based on the market price. The transfer price should reflect the price that the company would get from an outside customer. This ensures that the company does not lose out on potential profits or market share due to internal transfer pricing. The cost-based price may not consider external market factors and may not be competitive, while the negotiated price may lead to conflict between departments. The price set by central management may not reflect the actual market conditions and may not be optimal for the company.

What Is the Best Transfer Price When the Transferred Product