The goal of setting a transfer price is to
A)Maximize the overall profit of the organization.
B)Maximize the profit of the transferring division.
C)Motivate managers to behave in the best interest of the firm as a whole.
D)Ensure that all divisions have the products they need to operate.

Question

Quizplus · Accepted Answer

The goal of setting a transfer price is to ensure that managers behave in the best interest of the firm as a whole. This is important for creating a cohesive organizational structure and promoting cooperation among different divisions. Maximizing the profit of a transferring division or ensuring that all divisions have the products they need to operate may not always align with the overall goals of the organization. Similarly, maximizing the overall profit of the organization may not necessarily be the primary objective of setting a transfer price, as the focus is on promoting cooperation and harmonious operations.

The Goal of Setting a Transfer Price Is to