Transfer pricing
A)is a concept readily accepted by managers of divisions,because it relies on concepts used in cost-based pricing methods.
B)incorporates procedures that allow for ease in determining the amount of profit associated with each division of a decentralized company.
C)involves determining the cost and profit if the output of one division is transferred to another division of the same company.
D)is not used by many companies because it is difficult to eliminate intercompany profits.

Question

Quizplus · Accepted Answer

Transfer pricing involves determining the cost and profit if the output of one division is transferred to another division of the same company. This does not necessarily rely on cost-based pricing methods, nor does it guarantee ease in determining profit for each division. While some companies may struggle with eliminating intercompany profits, many still utilize transfer pricing as a tool for decentralized decision-making.

Transfer Pricing