The level of the transfer price can affect the overall company because
A) the higher the transfer price, the higher the operating income.
B) it may impact on the taxes paid by the multinational company.
C) the lower the transfer price, the lower the total costs.
D) internal transfers are always costly to the firm.
E) the transfer price may be higher than the cost-based price.

Question

Quizplus · Accepted Answer

The level of the transfer price can have an impact on the taxes paid by the multinational company. If the transfer price is set too high, it can lead to the multinational company paying higher taxes, which can affect their overall financial performance. On the other hand, if the transfer price is set too low, it can potentially attract scrutiny from tax authorities which can be costly for the company. Therefore, it is important for multinational companies to ensure that their transfer pricing is in line with market conditions and not set at an artificially high or low price.

The Level of the Transfer Price Can Affect the Overall