The approach that required the transfer price to be less than the market price but greater than the supplying division's variable costs per unit is called the
A) cost price approach
B) negotiated cost approach
C) standard cost approach
D) market price approach

Question

Quizplus · Accepted Answer

This approach is called the negotiated cost approach, where the transfer price is negotiated between the supplying and receiving divisions. The transfer price should be less than the market price to ensure competitiveness, but greater than the variable costs per unit to cover the supplying division's costs and ensure profitability. The other options listed are not applicable to this specific approach.

The Approach That Required the Transfer Price to Be Less