An advantage of using negotiated transfer prices is:
A) Both the selling and buying units have complete information about costs
B) It may take more of managers' time than is beneficial for the company
C) The market price will always be chosen
D) Once the price is set, it never needs to be adjusted

Question

Quizplus · Accepted Answer

Negotiated transfer prices allow both the selling and buying units to have complete information about costs, which can result in a fair and equitable price for both parties. This can lead to better decision-making and optimal use of resources. While it may take more time and effort to negotiate transfer prices, this can be outweighed by the benefits of ensuring both units are satisfied with the agreed price. The market price may not always be chosen, as the negotiated price may be higher or lower depending on the circumstances. The price may need to be adjusted in the future if costs or market conditions change.

An Advantage of Using Negotiated Transfer Prices Is