Transfer prices are normally based on market prices

Question

Quizplus · Accepted Answer

Transfer prices in decentralized companies may not always be based on market prices as there may not be an external market for the goods or services being transferred between different units of the same company. In such cases, the company needs to develop internal transfer prices that are fair and consistent with its overall objectives. This can be a complex and contentious issue, particularly when there are conflicts between the interests of different units within the company.

Transfer Prices Are Normally Based on Market Prices