The market price may be an inappropriate transfer price if
A) Competitors are practicing predatory pricing to eliminate competition
B) No intermediate markets exist
C) The market for the product is distressed
D) All of the above

Question

Quizplus · Accepted Answer

All of the options listed (A, B, C) describe situations where using the market price as a transfer price would be inappropriate. Predatory pricing, lack of intermediate markets, and distressed market conditions can all distort the market price, making it an unreliable basis for internal transfer pricing.

The Market Price May Be an Inappropriate Transfer Price If