The market price must be included in the analysis of a transfer price if the semi-finished product has an existing market for the selling division to consider.

Question

Quizplus · Accepted Answer

If there is an existing market for the semi-finished product, the market price should be considered in determining the transfer price to ensure that it is fair and reasonable. This is because the selling division may have opportunities to sell the product on the open market, and the transfer price should not be so high that it makes it difficult for the selling division to compete with external customers.

The Market Price Must Be Included in the Analysis of a Transfer