Cost-plus transfer prices are set by cost-plus pricing, which includes a mark-up to provide a profit for the supplying division. This method incorporates variable costs and fixed costs for the purpose of setting a transfer price that includes a profit margin.
Dual-rate transfer pricing is a method where transfer prices are set at different levels for the supplying and receiving divisions within an organization, aimed at incentivizing internal transactions without penalizing either division.
Full-cost transfer prices are internal pricing strategies where transfer prices are set based on full cost pricing but do not include a profit margin for the supplying division. This method is widely used but can lead to issues if cost information is inaccurate.
Market-based transfer prices align internal transactional prices with prevailing market prices to mitigate bias and ensure fairness within an organization’s various divisions.
Transfer prices set by negotiation between the supplying and receiving divisions of an organization, typically deemed appropriate when there is an imperfect market for the goods and services exchanged.
Transfer prices refer to the costs at which goods and services are exchanged between divisions or subsidiaries within a conglomerate. They significantly influence the profitability of each division and can serve multiple strategic purposes including motivating managers, evaluating performance, maintaining autonomy, and moving profits.
Transfer pricing involves setting prices for transactions between affiliated entities under common ownership, often used to allocate revenue and expenses among those entities to benefit from tax advantages.
