A transfer price should not contain any profit since the profit for a product should be determined when the product is completed.

Question

Quizplus · Accepted Answer

A transfer price may include profit. The transfer price is the price at which goods or services are transferred between divisions or departments within the same company. The selling division may include a profit in the transfer price to compensate for the cost of producing the goods or services and to ensure that the company as a whole remains profitable. However, the profit included in the transfer price should not be the final profit for the product, as additional costs and revenues may be incurred when the product is sold to customers outside of the company.

A Transfer Price Should Not Contain Any Profit Since the Profit