Which transfer-pricing method is useful for evaluating subunit performance,but transfer prices are affected by bargaining strengths of the buying and selling divisions?
A)Cost-based.
B)Negotiated.
C)Market-based.
D)Minimum-based.
E)Maximum-based.

Question

Quizplus · Accepted Answer

The negotiated transfer-pricing method would be the best choice in this scenario because it takes into account the bargaining strengths of both the buying and selling divisions. This method allows the two parties to come to an agreement on the transfer price that takes into consideration factors such as performance and profit margins. The cost-based method is not relevant in this scenario since transfer prices are not affected solely by production costs. The market-based method may not be appropriate if there are limited external markets for the goods or services being transferred. The minimum- and maximum-based methods are not commonly used in practice.

Which Transfer-Pricing Method Is Useful for Evaluating Subunit Performance,but Transfer