In a multidivisional company, one division "sells" its products or services to a second division for a(n) ________, which is set by a firm's corporate management to accomplish corporate objectives.
A) allocation price
B) transfer cost
C) market price
D) transfer price

Question

Quizplus · Accepted Answer

In a multidivisional company, when one division sells its products or services to another division, the price at which the transaction takes place is called a transfer price. This transfer price is typically set by corporate management to achieve corporate objectives, such as maximizing overall profits or incentivizing certain divisions to achieve specific goals. The other options (A, B, and C) are not commonly used terms for this concept.

In a Multidivisional Company, One Division "Sells" Its Products or Services