The transfer price that must be less than the market price but greater than the supplying division's variable costs per unit is called
A) the cost price approach
B) the negotiated cost approach
C) the standard cost approach
D) the market price approach

Question

Quizplus · Accepted Answer

The transfer price that is less than the market price but greater than the supplying division's variable costs per unit is called the negotiated cost approach. This approach involves negotiation between the supplying and receiving divisions to arrive at a mutually agreeable transfer price. The cost price approach uses the supplying division's total costs to determine the transfer price, while the market price approach uses the market price of the product to set the transfer price. The standard cost approach uses predetermined standard costs to set the transfer price.

The Transfer Price That Must Be Less Than the Market