In computing a transfer price,the maximum price should be no higher than the lowest market price at which the buying segment can obtain the good or service externally.

Question

Quizplus · Accepted Answer

This statement is correct and in accordance with the arm's length principle. The transfer price should not exceed the price that the buying segment would pay to purchase the same good or service from an external supplier, in order to avoid distorting the profits and tax payments of both the buying and selling segments.

In Computing a Transfer Price,the Maximum Price Should Be No