Which of the following is true about the negotiated transfer pricing approach?
A)A minimum transfer price is established by the buying division.
B)A negotiated transfer price should be used when an outside market for the goods does not exist.
C)A maximum transfer price is established by the selling division.
D)It is used more often than the cost-based and market-based approaches.

Question

Quizplus · Accepted Answer

The negotiated transfer pricing approach is used when there is no external market for the goods being transferred, therefore a negotiated price must be agreed upon between the buying and selling divisions. Option A and C are incorrect as minimum or maximum transfer prices are not established by either division but rather negotiated between them. Option D is also incorrect as the use of transfer pricing methods varies depending on the circumstances of the goods being transferred.

Which of the Following Is True About the Negotiated Transfer