The choice of transfer-pricing method:
A)merely reallocates total company profits among its smaller units.
B)does nothing to profits of sub-units.
C)merely reallocates total company profits among its bigger units.
D)affects the firm's total profits.

Question

Quizplus · Accepted Answer

The choice of transfer-pricing method affects the firm's total profits, as it determines how much revenue each unit will report and therefore affects the overall profit of the company. The goal of selecting an appropriate transfer-pricing method is to allocate profits fairly among different units while minimizing tax liabilities and avoiding penalties. Therefore, selecting the right transfer-pricing method is crucial for the company's financial reporting and tax planning.

The Choice of Transfer-Pricing Method