The most desirable way to set a transfer price is to base it on either variable cost or total cost.

Question

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The most desirable way to set a transfer price is to base it on market price, as this ensures that both the selling and buying divisions are incentivized to operate efficiently and competitively. Basing transfer price on variable or total cost may not accurately reflect the market value or opportunity cost of the goods or services being transferred.

The Most Desirable Way to Set a Transfer Price Is