Transfer price is a mechanism which is used for evaluating the value of goods and services. These are provided by the profit centre of an organization to other responsibility centres. Right calculation of transfer price is very important as it has an effect on other responsibility centres of that company.

Factors of Transfer Price

While evaluating any right transfer price, there are few factors which should be considered.

  • Measuring the divisional profitability correctly.
  • Ensuring that a unit’s authority and autonomy is preserved in the best way.
  • Motivating the centre managers for better work.


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