Negotiation between managers is not appropriate in determining a transfer price.

Question

Quizplus · Accepted Answer

Negotiation between managers is actually a common approach used to determine transfer prices, especially in decentralized organizations where each division or department operates as a profit or cost center. Through negotiation, managers can come to a mutually agreed upon transfer price that is fair and reasonable for both parties involved. However, it is important that the negotiation process is transparent and based on objective criteria to ensure that the transfer price is not biased or manipulated to benefit one division at the expense of another.

Negotiation Between Managers Is Not Appropriate in Determining a Transfer