The term transfer price refers to:
A) The price at which a product or service is sold to a government entity.
B) The price at which a product or service is sold by one segment to another related segment.
C) The price at which a product or service is sold by a segment to an outside party.
D)None of the above.

Question

Quizplus · Accepted Answer

Transfer price is the price at which a product or service is sold by one segment to another related segment within the same company or organization. It is important for companies to determine a fair transfer price to avoid distortion of financial information and to make sound business decisions. Option A is incorrect because transfer price is not necessarily exclusive to government entities. Option C is incorrect because it refers to an external party, not a related segment within the company. Option D is incorrect because transfer price is a well-established term in managerial accounting.

The Term Transfer Price Refers To