Knox Chemical Corporation is one of the largest producers of isopropyl alcohol, as it frequently is called. It is also used to make various chemical intermediates products. Because Knox Chemical produces both acetone and these chemical intermediates, it uses much of the isopropanol is to set transfer prices for isopropanol within the company.

a Knoxs product manager for isopropanol generally sets the transfer price equal to the prevailing market price. Is this a sensible procedure?