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If There Is a Competitive Market for the Product or Service

question 51

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If there is a competitive market for the product or service being transferred internally, using the cost-based price as a transfer price will generally lead to the desired goal congruence and managerial effort.


Definitions:

Simple Rate of Interest

Interest calculated only on the principal amount of a loan or deposit, without compounding.

Commercial Paper

An unsecured, short-term debt instrument issued by a corporation, typically used for the financing of payroll, accounts payable, inventories, and meeting other short-term liabilities.

Price

The amount of money required to purchase a good, service, or asset.

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment's cost.

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