A. Define transfer pricing and elaborate on FOUR (4) of its purposes.
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Please answer questions A, B and C. thank you
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- A transfer pricing arrangement that uses the price that would be charged to an external customer is a______. A. market-based approach B. negotiated approach C. cost approach D. decentralized approachDiscuss the advantages and disadvantages of a market-based transfer pricing approach.Discuss the advantages and disadvantages of a negotiated transfer pricing approach.
- Discuss the advantages and disadvantages of a cost-based transfer pricing approach.Discuss the concept of transfer pricing.Management of Great Springs Bottled Water Company has asked you, the controller, to develop a transfer pricing system for the company. The Transportation Department of the company sells all of its product to the Bottling Department of the company. Thus the Transportation Departments sales become the Bottling Departments cost of goods sold. In order to determine an optimal transfer pricing system, management would like you to demonstrate what an income statement would look like under a cost, market, and negotiated transfer pricing structure. These various transfer prices are listed as follows. Prepare an income statement for each of the transfer prices by filling in the missing numbers in the provided income statement based on each transfer price (thus four different income statements) and calculate the operating income/loss percentage. Prepare a brief summary of the results.
- Define transfer pricing and elaborate on FOUR (4) of its purposes. B. In deciding a transfer pricing method, advise management on:i. negotiated transfer pricingii. market-based transfer pricing C. Highlight ONE (1) advantageSelect Among the choices, this transfer prices basis is considered as the most inferior one: a. variable cost transfer pice b. full cost transfer price c. negotiatied transfer price d. external market transfer price e. dual transfer priceWhat is Transfer Pricing? What are the approaches in determining transfer prices? In your own idea, identify some best practices in transfer pricing.
- The three common approaches to setting transfer prices include: the _____ price approach, where the transfer price is the price at which the product or service transferred could be sold to outside buyers; the _____ price approach allows the managers to agree among themselves on a transfer price; and the _____ price approach, where cost is used to set transfer prices. cost; market; negotiated market; cost; negotiated market; negotiated; cost negotiated; market; cost none of the aboveExplain one advantage and one disadvantage of the following transfer pricing methods: Cost Market based NegotiatedThe company uses the opportunity cost approach to transfer pricing. What is the minimum transfer price in Case 1?
