Put simply, transfer pricing is a management tool for assigning a "price" to internally transferred goods (or services) in order to simulate the marketplace, thus encouraging managers to make decisions that are in the best interest of the:

Multiple Choice

• Operating managers.
• Manager of the buying (i.e., purchasing) unit.
• Operating units in the short run, and the firm in the long-run.
• Firm as a whole.
• Producing (i.e., selling) unit within the firm.