The transfer-pricing method that reduces the goal-congruence problems associated with a pure cost-plus-based transfer-pricing method is:
A)single pricing
B)dual pricing
C)market pricing
D)Both A and B are correct.

Question

Quizplus · Accepted Answer

Dual pricing allows for different transfer prices to be set for different purposes. One price can be used for cost-recovery purposes (such as determining the selling division's profitability), while a different price can be used for other purposes (such as determining the purchasing division's profitability). This reduces the incentive for divisions to manipulate transfer prices to achieve their own goals and promotes greater goal congruence within the organization. Single pricing (A) involves using the same transfer price for all purposes, which can lead to conflicts between divisions. Market pricing (C) may be difficult to apply in situations where there are no comparable external markets for the product or service being transferred.

The Transfer-Pricing Method That Reduces the Goal-Congruence Problems Associated with a Pure