If there exists an external market for an intermediate good produced by a company, then an easy way to set the set a transfer price would be to use:
A) market-based transfer prices.
B) marginal cost transfer prices.
C) full-cost transfer prices.
D) success monopoly transfer prices.

Question

Quizplus · Accepted Answer

Market-based transfer prices would be the best choice in this scenario because there already exists an external market for the intermediate good, meaning that an established price exists that can be used as a benchmark for the transfer price. Using a market-based transfer price would ensure that both the selling division and the buying division are acting in their own best interests, and that the transfer price is fair and based on the prevailing market conditions.

If There Exists an External Market for an Intermediate Good