Once companies have decentralized, they find themselves in a position where they will be able to attempt to establish transfer pricing between internal departments. In order to best accomplish this, the objectives for the buyer and seller must be considered, even if they are not fully disclosed to the other party. Which of the following represents a potential transfer price objective from the perspective of the buyer?
A) The buyer does not have a maximum purchase price in mind and would be willing to spend more if it meant they could keep all business in-house.
B) The buyer does not have a minimum purchase price in mind, but they would like to save as much money as possible.
C) If there is an existing supplier in place, then they would prefer to stay with them even if the internal department offers better pricing.
D) The buyer would be willing to pay more for an internal purchase than an external equivalent product.

Question

Quizplus · Accepted Answer

This question requires familiarity with transfer pricing and the potential objectives from an internal buyer's perspective. Choice B is the only choice that accurately depicts a potential transfer price objective from the perspective of the buyer. The other three choices all contain incorrect portions of the objective and are not accurate as it pertains to a buyer's objectives.

Once Companies Have Decentralized, They Find Themselves in a Position