A transfer pricing policy based on market price
A) Maximizes total organizational profit.
B) Is best because the market price is always objective and easily obtainable.
C) May result in suboptimal decision making for the company as a whole.
D) Is the only alternative accepted by the Internal Revenue Service.

Question

Quizplus · Accepted Answer

A transfer pricing policy based on market price may lead to suboptimal decision making because it might not reflect the internal cost structures or strategic objectives of the company, potentially leading to decisions that do not maximize overall company profit.

A Transfer Pricing Policy Based on Market Price