In most cases, ____ transfer prices achieve the optimal outcome for both the divisions and the company as a whole.

Question

Quizplus · Accepted Answer

Market-based transfer prices take into consideration the external market conditions and competition, and therefore, are likely to achieve the optimal outcome for both the divisions and the company as a whole. Cost-based transfer prices do not account for market conditions and may not provide an accurate reflection of the value of goods or services exchanged between divisions. Negotiated transfer prices may lead to conflicts and inefficiencies if the negotiating parties have different goals and information. Therefore, market-based transfer prices are the best option.

In Most Cases, ____ Transfer Prices Achieve the Optimal Outcome