A common problem associated with transfer pricing occurs when
A)a division purchases inputs for processing from an outside source at a price higher than the internal transfer price.
B)the gross margin pricing method is used to compute the price.
C)a division sells its excess output to an external customer.
D)managers do not agree with the transfer prices of the inputs provided to them or of the outputs of their own division.

Question

Quizplus · Accepted Answer

If managers do not agree with the transfer prices of the inputs provided to them or of the outputs of their own division, it can lead to disputes and conflicts between different divisions. This can result in sub-optimal decision making, inefficiencies, and reduced profitability. It is important for organizations to ensure that transfer prices are fair and reasonable, and are agreed upon by all relevant stakeholders.

A Common Problem Associated with Transfer Pricing Occurs When