What Is the Primary Advantage of a Negotiated Transfer Price

question 3

Multiple Choice

What is the primary advantage of a negotiated transfer price?

• A) It is objectively determined.
• B) It reflects managers' ability to control cost.
• C) It is based on arms-length transactions with unrelated parties.
• D) It preserves managerial autonomy to make decisions.

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Definitions:

Contractual Liability

This is the legal obligation parties have under a contract to fulfill the terms of the agreement.

Warranty Liability

The legal obligation of a seller to ensure that the goods or services sold meet certain expressed or implied standards of quality and reliability.

Secondarily Liable

Liability that is not primary but comes into effect when the party with primary liability has failed to fulfill an obligation.

Indorsers

Individuals who endorse or sign their name on the back of a document or cheque, thus transferring responsibility or ownership to another party.