It is beneficial for two related companies to use the cost price approach for transfer pricing when both the companies operate as cost centers and are not concerned with the revenue.

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When both the companies operate as cost centers, their focus is on minimizing costs rather than generating revenue. In such a scenario, using the cost price approach for transfer pricing ensures that costs are allocated fairly between the two companies, avoiding any disputes or conflicts. This approach allows both companies to focus on achieving their cost efficiency goals without any external pressure of generating revenue.

It Is Beneficial for Two Related Companies to Use the Cost