Which of the following transfer-pricing methods always achieves goal congruence?
A)full-cost plus a standard profit margin
B)a negotiated transfer price
C)a market-based transfer price
D)a cost-based transfer price

Question

Quizplus · Accepted Answer

A negotiated transfer price is the only method that achieves goal congruence because both the selling and buying divisions have an incentive to come to an agreement on a fair transfer price. This ensures that both divisions are satisfied with the transfer price and are motivated to perform at their best to achieve their own goals, ultimately leading to the overall success of the company. The other methods may result in conflicts and suboptimal decisions, as they may not accurately reflect the actual costs or market prices, leading to a discrepancy in the goals of the two divisions.

Which of the Following Transfer-Pricing Methods Always Achieves Goal Congruence