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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

When is the negotiated price approach preferred over the market price approach in setting transfer prices?

To determine

Concept Introduction:

Transfer Price:

Transfer Price is a price at which one division of a company transfers its goods to another division of the same company.

To Indicate:

The reason why negotiated price approach is preferred over the market price approach in setting the transfer price

Explanation

Transfer Price is a price at which one division of a company transfers its goods to another division of the same company.

The case when market bases transfer price is used is when the market price is equal or higher than the relevant cost of the product or part being transferred...

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