Transfer pricing can influence operating efficiency and profitability.

Question

Quizplus · Accepted Answer

Transfer pricing is the process of determining the value of goods or services that are being transferred between different departments or entities within a company. If transfer prices are set at an optimal level, it can lead to improved operating efficiency and profitability by allocating resources effectively and incentivizing departments to operate efficiently. However, if transfer prices are set too high or too low, it can lead to negative effects on operating efficiency and profitability. Therefore, transfer pricing has a significant impact on a company's financial performance.

Transfer Pricing Can Influence Operating Efficiency and Profitability