The transfer price that should be used by top management in evaluating whether a division should buy within the company or from an outside supplier is the:
A) negotiated transfer price.
B) transfer price based on full cost.
C) transfer price based on variable cost.
D) transfer price based on an open market price.

Question

Quizplus · Accepted Answer

The transfer price based on an open market price reflects the true economic cost and opportunity cost of the transaction, providing a fair basis for comparison with external suppliers.

The Transfer Price That Should Be Used by Top Management