Answered: Explain the criteria used for judging a…

Explain the criteria used for judging a transfer pricing system (ii) Explain the term “ negotiated versus imposed transfer prices “ (iii) Explain two methods of transfer pricing.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter10: Evaluating Decentralized Operations

Section: Chapter Questions

Problem 10DQ: When using the negotiated price approach to transfer pricing, within what range should the transfer...

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(i) Explain the criteria used for judging a transfer pricing system (ii) Explain the term “ negotiated versus imposed transfer prices “ (iii) Explain two methods of transfer pricing.

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A 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 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 approach
Discuss the advantages and disadvantages of a negotiated transfer pricing approach.
Discuss the advantages and disadvantages of a market-based transfer pricing approach.
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) advantage
Which of the following transfer price approaches is used when the transfer price is set at the amount sold to outside buyers? a. variable price b. cost price c. negotiated price d. market price
What 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 above
Select 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 price
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?
What are the calculation formulas for transfer pricing?