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Forums › ACCA Forums › ACCA PM Performance Management Forums › Transfer Pricing
A disadvantage of market value transfer prices
A transfer price at market value might, under some circumstances, act as a disincentive to use up any spare capacity in the divisions.
A price based on incremental cost, in contrast, might provide an incentive to use up the spare resources in order to provide a marginal contribution to profit.
Sir can you please explain this disadvantage of market price based transfer price with an example.
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