Transfer Pricing

|Question: | |Literature in the area of transfer rag up covers a number of different approaches such(prenominal)(prenominal) as mesh marginal follow as transfer equipment casualty or using activity based wooing | |techniques to split price into twain or more elements. Evaluate the | |effectiveness of these cardinal different approaches.

| | | Transfer prices set by marginal make up pricing, when there is no market for the goods and services that are bought and qualifying between the disagreements of an organization, the transfer price should be the marginal bell, which is commonly 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. fracture overhead is added, includi ng energy bills, wages of excess workers and! rent of excess factory space. Setting transfer prices equal to marginal be helps managers to identify the output levels that will maximize profits. There cud 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 achieve 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 track based on budgeted data, The company calculates standard...If you want to get a full essay, order it on our website: BestEssayCheap.com

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