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market-based transfer prices


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*Transfer prices that are based on market prices. When there is a perfectly competitive market for the goods and services that are bought and sold between divisions of an organization, the transfer price should be the market price. The transfer price may be slightly lower than the market price if the selling expenses are lower for interdivisional transfers, e.g. because there is no advertising cost for transfers between divisions. There is a problem for managers in that market prices may fluctuate.

Subjects: Accounting.


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