Determining the transfer price as the price at which the product or service transferred could be sold to outside buyers is known as the:
A) Cost price approach
B) Negotiated price approach
C) Revenue price approach
D) Market price approach

Question

Quizplus · Accepted Answer

The market price approach is the method of determining the transfer price as the price at which the product or service transferred could be sold to outside buyers. This approach ensures that the transfer price is fair and reflects the true market value of the product or service, resulting in a win-win situation for both the selling and buying divisions within the same organization. The other approaches (cost price, negotiated price, and revenue price) do not take into account the prevailing market conditions and may lead to an unfair transfer price.

Determining the Transfer Price as the Price at Which the Product