Use of market transfer prices
A)is the only acceptable approach in a free enterprise economy.
B)usually does not cause the selling division to ignore negotiating attempts by the buying division.
C)may cause an internal shortage of materials.
D)usually does not work against the operating objectives of the company as a whole.

Question

Quizplus · Accepted Answer

Market transfer prices may cause an internal shortage of materials because the buying division may not be willing to pay the market price and may look for alternatives outside the company. This can lead to inventory shortages and production delays. The other options are incorrect because market transfer prices are not always the only acceptable approach in a free enterprise economy, they may cause the selling division to ignore negotiating attempts by the buying division, and they may work against the operating objectives of the company as a whole.

Use of Market Transfer Prices