In Comparing the Three Basic Approaches to Transfer Pricing, Which

question 58

Multiple Choice

In comparing the three basic approaches to transfer pricing, which of the following statements would be true?

• A) A cost-based approach preserves subunit autonomy while negotiated transfer prices do not.
• B) Market-based transfer pricing motivates managers but negotiated prices do not.
• C) Cost-based transfer pricing systems are more difficult to implement and often make more time to implement than negotiated transfer pricing.
• D) Market-based transfer pricing achieves goal congruence when markets are competitive while cost-based can achieve goal congruence, but not always.

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Definitions:

Primary Drives

Basic, innate urges such as hunger, thirst, and the drive for sex, which are essential for survival.

Drive-Reduction Principle

A theory suggesting that psychological needs create an aroused state that drives an individual to engage in behaviors to reduce that tension or fulfill the need.

Motivation

The driving force behind actions, fueled by the desire to achieve a goal or satisfy a need.

Intensity

The measurable amount of a property, such as force, brightness, or a magnetic field, often described in terms of its power or degree.