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An organization is comprised of two divisions. One of the divisions manufactures a product that it sells both to an imperfect external market and to the other division.
The organization wishes to establish the most suitable basis for the transfer price for this product and is considering either a negotiated transfer price or a market-based transfer price.
Which of the following statements is correct?
Suggested Answer: A, C, D
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33 comments · newest first
KA
Kathrine
11 months ago
Protracted negotiations can really slow things down, though.
SU
Sueann
11 months ago
Market-based prices are better for divisional autonomy, no doubt.
FA
Fabiola
11 months ago
Surprised that people think negotiated prices always lead to goal congruence!
DE
Della
12 months ago
I disagree, a single market price is usually more straightforward.
TY
Ty
12 months ago
A negotiated transfer price can definitely help with pricing issues.
RO
Rodolfo
12 months ago
Option D seems to make sense since a market-based price could support divisional autonomy, but I wonder if it really ensures goal congruence like it claims.
PI
Pilar
1 year ago
I feel like option C might be misleading; I recall that negotiated prices don't guarantee goal congruence, but I can't remember the exact reasons why.
LA
Lashawna
1 year ago
I think option B sounds familiar because we practiced a question about how market prices can be easier to determine, but I’m not completely confident about the implications of negotiations.
TI
Timmy
1 year ago
I remember we discussed how negotiated transfer prices can sometimes help align interests between divisions, but I'm not sure if that always leads to a single price for the external market.
DE
Derick
1 year ago
Ah, I see. A negotiated transfer price could help overcome the issue of a single external market price, while a market-based price ensures divisional autonomy. I've got a strategy now.
AR
Arlette
1 year ago
I think the key here is to understand how each transfer pricing method affects goal congruence and divisional autonomy. That should help me determine the most suitable basis.
JO
Johna
1 year ago
Hmm, I'm a bit confused about the difference between a negotiated transfer price and a market-based transfer price. I'll have to review those concepts again.
OR
Ora
1 year ago
This seems like a tricky question. I'll need to carefully consider the pros and cons of each transfer pricing method.
EL
Elbert
1 year ago
A market-based transfer price seems like the way to go. It will ensure both divisional autonomy and goal congruence. Plus, it's way easier than trying to negotiate a price that makes everyone happy. Negotiating is like herding cats - good luck with that!
GA
Gabriele
1 year ago
A single market price for all of the division's output can be determined easily whereas a negotiated transfer price may result in protracted negotiations.
CA
Cassi
1 year ago
Negotiating is like herding cats - good luck with that!
JO
Joesph
1 year ago
A market-based transfer price will ensure both divisional autonomy and goal congruence because part of the division's output is sold to the external market.
CA
Callie
2 years ago
A negotiated transfer price will always result in goal congruence? I don't think so. It really depends on how the negotiations are structured and the incentives in place for each division.
KA
Kaycee
1 year ago
I) A negotiated transfer price may not always lead to goal congruence, it depends on the negotiation process and incentives in place.
KE
Keena
1 year ago
C) A negotiated transfer price will always result in goal congruence whereas this is not always true when using a single market-based transfer price.
JI
Jina
1 year ago
B) A single market price for all of the division's output can be determined easily whereas a negotiated transfer price may result in protracted negotiations.
CA
Carri
1 year ago
A) A negotiated transfer price could help to overcome the problem of establishing a single price for this external market.
MI
Micah
2 years ago
I disagree. A single market price for all of the division's output can be determined easily, and a negotiated transfer price may result in protracted negotiations and conflicts between the divisions.
RO
Rory
1 year ago
B) A single market price for all of the division's output can be determined easily whereas a negotiated transfer price may result in protracted negotiations.
MI
Mila
1 year ago
A) A negotiated transfer price could help to overcome the problem of establishing a single price for this external market.
RO
Ronald
2 years ago
That's true, but a negotiated transfer price could also lead to better goal congruence between the divisions.
KR
Kristofer
2 years ago
A negotiated transfer price could help overcome the problem of establishing a single price for the external market. This would allow for more flexibility in pricing based on the specific needs of each division.
GO
Goldie
1 year ago
D) A market-based transfer price will ensure both divisional autonomy and goal congruence because part of the division's output is sold to the external market.
BR
Brittani
1 year ago
C) A negotiated transfer price will always result in goal congruence whereas this is not always true when using a single market-based transfer price.
RE
Rebecka
1 year ago
B) A single market price for all of the division's output can be determined easily whereas a negotiated transfer price may result in protracted negotiations.
TH
Thaddeus
2 years ago
A) A negotiated transfer price could help to overcome the problem of establishing a single price for this external market.
TE
Teddy
2 years ago
But wouldn't determining a single market price be easier and more efficient for the organization?
RO
Ronald
2 years ago
I think a negotiated transfer price could help in setting a fair price for the external market.