As Noted in the Text, the Use of Market Price

question 36

Essay

As noted in the text, the use of market price can be used to set the transfer price associated with interdivisional transfers of goods and services.
Required:
1. What are the primary advantages of using market price as the transfer price?
2. What are the primary disadvantages of using market price as the transfer price?

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Definitions:

Cognitive Abilities

Mental capabilities such as learning, thinking, reasoning, problem-solving, decision-making, remembering, and paying attention.

Conventional Level

A stage in Kohlberg's theory of moral development where moral reasoning is based on adherence to social rules and norms.

Moral Development

The process by which individuals develop attitudes and behaviors towards others based on cultural norms, ethics, and laws.

Postconventional Level

A stage in Lawrence Kohlberg's theory of moral development where individuals make moral decisions based on universal ethical principles, beyond societal norms or laws.