Which of the Following Transfer-Pricing Methods Always Achieves Goal Congruence

question 33

Multiple Choice

Which of the following transfer-pricing methods always achieves goal congruence?

• A)full-cost plus a standard profit margin
• B)a negotiated transfer price
• C)a market-based transfer price
• D)a cost-based transfer price

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Definitions:

Direct Write-Off Method

An accounting practice where bad debts are written off against income at the time they are determined to be uncollectible, instead of being provided for in advance.

Account Receivable

Funds that customers owe a company for products or services provided on credit.

Dishonored Note

A promissory note that has not been paid by the maker at the maturity date.

360-Day Year

An accounting convention that simplifies interest calculations by assuming each month has 30 days, totaling 360 days for the year.