Which of the following transfer prices, in theory, is the most sound because it provides the best measure of the opportunity cost of inter-divisional transfers?
A)Variable cost-based transfer prices.
B)Full cost-based transfer prices.
C)Market-based transfer prices.
D)Negotiated transfer prices.
E)None of the above.

Question

Quizplus · Accepted Answer

Market-based transfer prices use actual market prices to determine the value of inter-divisional transfers. This provides the best measure of the opportunity cost because it reflects the price that would be paid if the transfer was made with an outside party. However, in practice, market-based transfer prices may not always be feasible or appropriate, and in those cases, negotiated transfer prices may be the best option.

Which of the Following Transfer Prices, in Theory, Is the Most