The goal of setting a transfer price is to

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The goal of setting a transfer price is to motivate managers to behave in the best interest of the firm as a whole. This means that the transfer price should reflect the true cost of producing or acquiring the goods or services being transferred, rather than simply maximizing the profit of the transferring division. This helps ensure that resources are allocated efficiently and fairly across the organization. Maximizing overall profit or ensuring that all divisions have the resources they need may be important considerations, but they are not the primary goal of setting a transfer price.

The Goal of Setting a Transfer Price Is to