The objectives of setting transfer prices include
A) goal congruence.
B) maximizing the selling subunit's income.
C) subunit autonomy.
D) minimizing the purchasing subunit's costs.
E) goal congruence and subunit autonomy.

Question

Quizplus · Accepted Answer

Setting transfer prices with the objectives of both goal congruence and subunit autonomy is the best choice. Goal congruence means that the transfer price promotes the interests of the overall organization and encourages subunits to act in the best interests of the organization as a whole. Subunit autonomy means that subunits are given the freedom to make decisions and operate as independent entities. A transfer price that balances both of these objectives can lead to better decision making and overall performance for the organization. The other options (maximizing the selling subunit's income and minimizing the purchasing subunit's costs) only focus on the individual subunit's interests, which may not align with the organization's overall goals.

The Objectives of Setting Transfer Prices Include