A primary characteristic of a negotiated transfer price is that it:

Question

Quizplus · Accepted Answer

Negotiated transfer prices typically require a significant amount of negotiation and agreement between the divisions involved, which can be costly and time-consuming to implement. Therefore, option C is the correct choice. Option A is incorrect because negotiated transfer prices still hold each division accountable for their performance. Option B is incorrect because negotiated transfer prices typically increase sub-unit autonomy, as they allow each division to negotiate prices independently based on their own cost structures. Option D is incorrect because negotiated transfer prices aim to transfer the optimum number of units between the buying and selling divisions, not more than necessary. Option E is incorrect because negotiated transfer prices take into account the negotiating skills of each division's managers when determining the transfer price, making performance indicators partially dependent on these skills.

A Primary Characteristic of a Negotiated Transfer Price Is That