What is the price the selling division charges for a component purchased by the buying division of the same company?
A)transfer price
B)economic value added price
C)market price
D)cost-based price

Question

Quizplus · Accepted Answer

The price that the selling division charges for a component purchased by the buying division of the same company is known as the transfer price. This price should ideally reflect the fair market value of the component, but in reality, it may be based on cost or other factors. It is important for companies to set transfer prices fairly to avoid inefficiencies and conflicts between divisions. Therefore, option A is the correct answer. Economic value added price, market price, and cost-based price are not relevant in this context.

What Is the Price the Selling Division Charges for a Component