Why is transfer pricing important?
A)It plays a key role in determining the ultimate profitability of the company as a whole.
B)It plays a key role in determining the profitability of the division that sells the product.
C)It plays a key role in determining the profitability of the division that buys the product.
D)It plays a key role in determining the profitability of both the selling and buying divisions of the company.

Question

Quizplus · Accepted Answer

Transfer pricing affects both the selling and buying divisions of a company, as it determines the price at which goods or services are transferred between them. By setting transfer prices appropriately, a company can influence the profitability of both its selling and buying divisions. This makes transfer pricing an important factor in determining the overall profitability of the company as a whole.

Why Is Transfer Pricing Important