Negotiated Transfer Pricing Is Not Always Used Because of Each

question 27

Multiple Choice

Negotiated transfer pricing is not always used because of each of the following reasons except that

• A) market price information is sometimes not easily obtainable.
• B) a lack of trust between the negotiating divisions may lead to a breakdown in the negotiations.
• C) negotiations often lead to different pricing strategies from division to division.
• D) opportunity cost is sometimes not determinable.

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Definitions:

Return On Investment (ROI)

A financial metric used to evaluate the efficiency of an investment, calculated as net profit divided by the cost of the investment.

Net Operating Income

A financial metric that calculates the profit generated from a company's normal business operations, excluding expenses and incomes from non-operational activities.

Operating Assets

Assets utilized in the regular course of business operations to generate revenues, such as machinery, buildings, and equipment.

Residual Income

The amount of income that an individual or company has after all operating expenses, including cost of goods sold and taxes, have been paid.