Cost-based transfer prices are helpful in each of the following except:
A)when market prices are available.
B)when market prices are unavailable.
C)when market prices are inappropriate.
D)when markets are not perfectly competitive.
E)when internal products are different from the products available externally in terms of quality and customer service.

Question

Quizplus · Accepted Answer

Cost-based transfer prices are not helpful when market prices are available, as market prices provide a better indication of the actual value of the products or services being transferred between two different segments of an organization. However, cost-based transfer pricing can be helpful when market prices are unavailable, inappropriate, or when the internal products have different qualities or customer service levels than external products. Additionally, cost-based transfer pricing can be useful when markets are not perfectly competitive, as market prices in such cases may not accurately reflect the true value of the product or service being transferred.

Cost-Based Transfer Prices Are Helpful in Each of the Following