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Unformatted text preview: Market-based transfer pricing Marginal cost transfer pricing Full cost transfer pricing Cost-plus mark-up transfer pricing Negotiated transfer pricing The best method depends on the current divisional situation. Factors to consider when using the above methods can be: excess capacity or availability of an external market for the product that is being internally transferred. When selecting a transfer pricing method, the autonomy of the division must not be placed into jeopardy. Having said the above, the most advisable method is market-based transfer pricing when possible. Market-based is based on the existing external market price. In using this method, the selling division bases its transfer price on the existing market rate. Manufacturing companies use internal transfer pricing when moving parts from one division to another. Another example is oil companies like BP, when they transfer crude oil to their refineries....
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- Spring '10