The market price is the most appropriate transfer price to be charged by one department to another in the same organization for a service provided when:
A) There is an external market for that service.
B) The selling department operates at 50 percent of its capacity.
C) The purchasing department has more negotiating power than the selling department.
D) There is no external market for that service.

Question

Quizplus · Accepted Answer

The market price is appropriate when there is an external market for the service, as it reflects the fair value that could be obtained in an open market transaction.

The Market Price Is the Most Appropriate Transfer Price to Be