Transfer Pricing

This topic has 1 reply, 2 voices, and was last updated 7 years ago by Ken Garrett.

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May 6, 2019 at 3:42 pm #515105
sureena
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In order for a firm to maximize its profit,
divisions should have autonomy to set intra divisional transfer prices YES
head office should impose transfer prices between divisions NO

Am I right?
May 6, 2019 at 5:44 pm #515119
Ken Garrett
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Wrong.

Head office should ensure that the company as an entity maximises profit and this will require it to set transfer prices. If divisions do it there is a chance that a division will maximise its own profit but that will not necessarily maximise company profit.
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