Dear ALL,I need your help with the following topic, max 500 words:Describe and evaluate the various...

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Dear ALL,I need your help with the following topic, max 500 words:Describe and evaluate the various approaches for setting transfer prices.How can the use of different approaches between the selling and buying divisions be reconciled?Market priceVariable CostFull costNegotiated Pricesetc.Im supposed to use peer reviewed articles for my research, but I find it difficult to find good ones.Thank you.Cheers,Marcela

David · Accepted Answer

1 
 
        Transfer pricing is defined as the price that is quoted when the products are 
transferred from one division to the other within the same organization. The selling division of 
the company charges certain prices to the buying decision and it is termed as the transfer pricing. 
The transfer prices are important to be computed in order to evaluate the correct divisional 
profits, as many times the divisions of the same organization exchange goods or services that are 
not accounted properly. It is also relevant for the calculation of income taxes for the 
multinational firms that have operations across the world.  
There are many methods that can be used for fixing the transfer prices, depending upon 
various factors that are considered in fixing the prices. The various types of methods are market 
based transfer pricing, full cost transfer pricing, cost-plus a mark-up transfer prices and 
negotiated transfer prices. Each method has its own set of advantages and disadvantages such as: 
Market Based Transfer Prices: The market based transfer price is used when the 
competition is high in the market and the industry is comparatively stable.

Dear ALL, I need your help with the following topic, max 500 words: Describe and evaluate the various approaches for setting transfer prices.How can the use of different approaches between the selling...

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