Cost based transfer prices are usually regarded as the best approach to setting a transfer price

Question

Quizplus · Accepted Answer

Cost-based transfer prices can lead to inefficiencies and may not always reflect the true market value of the goods or services being transferred, making them not universally regarded as the best approach. Market-based or negotiated transfer prices are often considered better as they can more accurately reflect the economic reality and incentivize performance.

Cost Based Transfer Prices Are Usually Regarded as the Best