Question

When should the top management intervene in setting the transfer price? The transfer is an extraordinarily large order. Internal transfers are rare. Internal transfer benefits the company but the division managers cannot agree on a price. All of the above.

Answer 1

Answer:

The transfer is an extraordinarily large order.

Explanation:

The role of top management is to deal with important and relevant issues, that is why they are in charge of corporate strategies while middle managers are responsible for developing and carrying out business tactics necessary for achieving them.

Unless the amount of goods transferred from one subsidiary to another, or to the parent company is extremely large, then middle managers should deal with it. E.g. a bank's CEO will not get involve in a loan's underwriting unless the loan is for many millions. The same with any company's CEO, CFO or COO, they are paid to deal with important stuff, not common day to day things.

Answer 2

Answer:

Internal transfer benefits the company but the division managers cannot agree on a price.

Explanation:

Based on the scenario been described in the question, the situation when the top managers can intervene, it is when internal transfer will benefit the company, but the division managers cannot come into a unanimous agreement, in this case, it will make the top managers to step in making and help in the decision of pricing for them to resolve the conflict of agreeing on price.