Understand the Criteria for Evaluating Transfer Prices with Myhomeworkhelp.com
Inter divisional transfer or exchanges of goods and services in an organization have to be denoted in monetary or finances concerning to money; this is referred to as ‘transfer pricing.’ Working on transfer pricing is complex that involves a range of related issues that can be resolved through criteria for evaluating transfer prices assignment help.
Different methods of fixing of transfer pricing are as follows-
- Transfer pricing based on opportunity cost-
It determines the minimal price that the selling department allows to receive or accept and highest price to be paid by the buying department. Finally, considering the minimum average prospects of both the departments forms the basis for transfer pricing.
Ideally, price by the selling department is lower than the highest price to be paid by the buying department. Chances of collision relating to opportunity cost, hence, in reality, it may occur rarely.
- Negotiated pricing-
This procedure fixes the transfer price through bargaining ornegotiations among the buying and the selling department or division.
In some cases, the buying department likes to purchase the product from the market rather than from the selling department. This situation leads to conflicts between buying and selling department.
In another case, the selling department may not sell the particular product to the buying department because sometimes buying department want to purchase the product at a price which is lower than the market price. In all these conflicts both the department get affected. With our criteria for evaluating transfer prices assignment help, you can get a complete idea of this subject.
For the mutual benefit, both the department must negotiate the prices together to a single price. Having access to the present data and options will make the procedure effective.
- Transfer price on market price-
In this procedure, market price persisting in the market determines the transfer price.
Advantages of transfer price based on market price:
- Transfer prices based on market price results in profits that are the best criterion for analyzing the performance of divisions involved in buying and selling.
- It refrains from intervention process in fixing the transfer price in divisions of an organization.
Limitations of transfer price based on market price:
- Market price is subjected to change regularly
- Determining market price is not simple
- Market price may have variations, and therefore, there may arise complications in fixing of these prices
Though transfer pricing is of much importance to be taken into account in a firm or organization still, criteria for evaluating transfer pricing is a subtle topic which should be handled diligently especially for students. Here, experts from criteria for evaluating transfer prices homework help.
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