Accounting · Management Accounting
The management of Process Co has decided that all products transferred from Division A to Division B will be charged using a transfer price equal to the variable costs of production. Division A will be required to supply as many kg as Division B wishes to buy at this price but will be allowed to sell any surplus kg externally. Which objective of a good transfer pricing system is primary achieved by this policy?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Profit maximization of Division A alone
- 2Fair evaluation of divisional performance
- 3Goal congruence✓
- 4Autonomy
Correct answer
Goal congruence
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