Given a competitive outside market for identical intermediate goods,what is the BEST transfer price,assuming all relevant information is readily available?

Question

Quizplus · Accepted Answer

The best transfer price in a competitive outside market for identical intermediate goods would be the market price of the intermediate goods. This is because if the subsidiary charges a price higher than the prevailing market price, the parent company may opt to purchase the goods from the external market instead. Likewise, if the subsidiary charges a price lower than the market price, they are losing out on potential profit. Therefore, it is best to use the market price as the transfer price to ensure competitiveness and maintain profitability.

Given a Competitive Outside Market for Identical Intermediate Goods,what Is