Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 35

Transfer Pricing; Decision Making Using the information from requirement 1 of exercise 19-33, assume that division B could sell 10,000 units outside for $210 per unit with variable marketing costs of $8. Should division B sell outside or to division A? Explain.

Step 1 of 2

Transfer pricing is the price calculation approach where the good is been sold from one unit to another unit of same firm. There are different methods to calculate transfer pricing like variable cost method, full cost method, market price method, etc.