transfer pricing

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May 23, 2017 at 9:42 am #387567
ngingi
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transfer pricing might act as a disincentive to use up any spare capacity in the divisions.A price based on incremental costs in costs might provide an incentive to use up the spare resource in order to provide a marginal contribution to profit.please explain this disadvantage
May 23, 2017 at 2:50 pm #387612
John Moffat
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The second sentence is not a disadvantage – quite the reverse.
It is the first sentence that is saying that if the transfer price is not set sensibly then it might act as a disincentive.
All of this is explained in my free lectures on transfer pricing.
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