ANSWER TRUE OR FALSE Transfer prices can be used to promote goal congruence among operating segments of an organization. In computing a transfer price, the maximum price should be no higher than the lowest market price at which the buying segment can obtain the good or service externally. In computing a transfer price, the maximum price should be no higher than the highest market price at which the buying segment can obtain the good or service externally. In computing a transfer price, the minimum price should be no lower than the incremental costs associated with the goods plus the opportunity cost of the facilities used. One of the main factors to consider when using a cost-based transfer price is whether to use actual or standard costs. When using a negotiated transfer price, a decision must be made which market price to use. When using a market-based transfer price, a decision must be made which market price to use. When using a market-based transfer price, a decision must be made how price disputes will be handled. When using a negotiated transfer price, a determination must be made if comparable substitutes are available externally. Market based transfer prices are most effective for common high-cost and high-volume standardized services. Cost-based transfer prices are most effective for common high-cost and high-volume standardized services.

Let's understand some basics Transfer pricing is an accounting practice that represents the price…

Answered: ANSWER TRUE OR FALSE Transfer…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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ANSWER TRUE OR FALSE

Transfer prices can be used to promote goal congruence among operating segments of an organization.

In computing a transfer price, the maximum price should be no higher than the lowest market price at which the buying segment can obtain the good or service externally.

In computing a transfer price, the maximum price should be no higher than the highest market price at which the buying segment can obtain the good or service externally.

In computing a transfer price, the minimum price should be no lower than the incremental costs associated with the goods plus the opportunity cost of the facilities used.

One of the main factors to consider when using a cost-based transfer price is whether to use actual or standard costs.

When using a negotiated transfer price, a decision must be made which market price to use.

When using a market-based transfer price, a decision must be made which market price to use.

When using a market-based transfer price, a decision must be made how price disputes will be handled.

When using a negotiated transfer price, a determination must be made if comparable substitutes are available externally.

Market based transfer prices are most effective for common high-cost and high-volume standardized services.

Cost-based transfer prices are most effective for common high-cost and high-volume standardized services.

Definition Definition System of assigning an estimated cost to the product (instead of the actual cost) so that the product cost can be determined well in advance and the pricing of the product can be done on time. Since the actual cost cannot be predicted at the initial stage of the production process, the estimated cost is recorded in the books. Any deviation of the estimated cost of the actual cost is adjusted in the books at the end of the period.

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