Transfer Pricing

|Question: | |Literature in the area of transfer postulate up covers a number of different approaches such(prenominal) as use marginal follow as transfer legal injury or using activity based tolling | |techniques to split price into twain or more elements. Evaluate the | |effectiveness of these dickens different approaches.

| | | Transfer prices set by marginal address pricing, when there is no market for the goods and services that are bought and dislodge between the particles of an organization, the transfer price should be the marginal salute, which is ordinarily assumed to be short-term variable cost. A division records all of the parts used to make, for example, a computer case, such as the sheets of metal and plastic used to build it. unfirm overhead is added, including energy bills, wages of excess workers and rent of redundant facto! ry space. Setting transfer prices equal to marginal be helps managers to identify the output levels that will maximize profits. There sens be problems if managers do not have accurate cost information. This creates an incentive for division managers to mislead central managers. Without considering fixed costs, the germinate division gets a discount compared with buying parts on the open market, and the manufacturing division appears inefficient, which affects each managers review. If using the Activitiy Based cost for transfer pricing, the price are set for coming air division based on budgeted data, The company calculates standard...If you want to get a full essay, order it on our website: OrderCustomPaper.com

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