When one partner is operating in a low-inflation environment and the other in an environment of rampant inflation, what is best to do with transfer prices?
A) Accommodate third party inquiries
B) Re-district the formulation of prices
C) Pierce the market through substantiation
D) Adjust transfer prices to balance the effect

Question

Quizplus · Accepted Answer

When one partner is operating in a low-inflation environment and the other in an environment of rampant inflation, adjusting transfer prices to balance the effect would be the best choice. This is because if transfer prices are not adjusted, it could lead to either under or over-pricing of goods or services, resulting in unfair profits or losses for one partner. Therefore, balancing the effect of inflation by adjusting transfer prices is the best solution to maintain a fair and smooth business relationship between partners.

When One Partner Is Operating in a Low-Inflation Environment and the Other