Transfer pricing is appropriate when
A) The company cannot compute residual income
B) The company only has cost centers
C) The company has profit and/or investment centers
D) The company is highly centralized

Question

Quizplus · Accepted Answer

Transfer pricing is most appropriate for companies with profit and/or investment centers because it allows these decentralized units to transact with each other in a way that reflects their contribution to the company's profitability. This method helps in measuring the performance of different units by treating them as separate entities.

Transfer Pricing Is Appropriate When