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3 ways companies uses to determine transfer prices.

Transfer pricing is the setting of the price for goods and services sold between controlled or related legal entities within an enterprise. For example if the subsidiary company sells goods to the parent company the cost of those goods paid by the parent to the subsidiary is the transfer price.

Bases for determining transfer price

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Transfer pricing – meaning.

Transfer price is the cost of buying the product in the buying division and is the sales revenue for the selling division. The level of the transfer price will affect the profitability of both divisions and thus has performance appraisal implications. Transfer pricing occurs where an organizational structure itself into separate independent divisions. When separate divisions within the organization buy … Read the rest