Which transfer price approach is used when the transfer price is set at the amount sold to outside buyers?
A) Market Price
B) Cost Price
C) Negotiated Price
D) Variable Price

Question

Quizplus · Accepted Answer

When the transfer price is set at the amount sold to outside buyers, the market price approach is used as it ensures that the internal transaction is based on the actual price at which the product is sold in the market. This approach ensures that both the selling division and the buying division are treated as separate business entities and the transaction is conducted at a fair price. Thus, the market price approach is the most appropriate choice in this situation.

Which Transfer Price Approach Is Used When the Transfer Price