Question

Describe a fictional company scenario that transfers a product to another company. Be sure to include...

Describe a fictional company scenario that transfers a product to another company. Be sure to include detailed figures such as price you typically charge customers (if you are selling the product to another segment) or purchase the product for (if you are buying the product from another segment), the product you are selling, the transfer pricing method you are using, and the price you transfer the product for. Your response must be posted to the discussion

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Answer #1

Deciding Transfer pricing between segments for product is not a easy task,

Factors may involve in decide to transfer pricing

A. Availability of product in market wheather seller having sole selling agent and having Monopoly in market then transfer pricing is market rate

B. If product available easily in market and market rate equel or lower then transfer pricing is market rate if vice-versa any price charged lower of market rate.

C. If seller segment having in minimum fulfillment condition and raw material rationing then Transfer pricing is cost + opportunity cost of profit foregone

Above discussed situations are few examples of transfer pricing method according to condition it is not a complete list, many more factors influence the transfer pricing.

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