In terms of operating income for the company as a whole, the transfer price set by the buying and selling divisions nets out.

Question

Quizplus · Accepted Answer

The transfer price set by the buying and selling divisions affects the operating income of each division, but it should cancel out at the company level since the profit or loss of one division is offset by the profit or loss of the other division. Therefore, the transfer price shouldn't affect the company's overall operating income.

In Terms of Operating Income for the Company as a Whole