Discuss the problems that arise specifically when determining transfer prices where divisions are located in different countries
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Discuss the problems that arise specifically when determining transfer prices where divisions are located in different countries
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- Many organizations use transfer pricing when transferring products between different divisions of the same organisation. Critically discuss the advantages and disadvantages of the method: Negociated transfer price. Note: Define, explain gives examples and advantages and disadvantagesMany organizations use transfer pricing when transferring products between different divisions of the same organisation. Critically discuss the advantages and disadvantages of the method: Market based transfer price. Note: Define, explain gives examples and advantages and disadvantagesMany organizations use transfer pricing when transferring products between different divisions of the same organisation. Critically discuss the advantages and disadvantages of the method: Cost plus a mark-up transfer prices Note: Define, explain gives examples and advantages and disadvantages
- Would a market-based transfer price be agreeable to both divisional managers?“Under the general guideline for transfer pricing, the minimum transfer price will vary depending on whether the supplying division has unused capacity or not.” Do you agree? Explain.Explain the meaning of transfer pricing and how a company could price products passing from one operating division to another when they also have external customers.
- What range of transfer prices will motivate divisions S and T to demand the quantities that maximize overall income , as well as motivate division R to produce the sum of those quantities?Explain how negotiation between the supplying and buying units may be used to set transfer prices. How does this relate to the general transfer pricing rule?Discuss the advantages and disadvantages of a negotiated transfer pricing approach.
- 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 approachA transfer pricing structure that considers the opportunity costs of selling to internal rather than external customers uses_______. A. the cost approach B. the general transfer pricing approach C. the market-based approach D. the opportunity cost approachManagement 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.
