You are the general manager of the machining products division of a diversified manufacturing company in Des Moines, Iowa. You primarily produce machining products for sale to wholesalers around the world. However, you periodically get requests from other divisions in your company to purchase your products. You treat these purchase requests the same as a purchase request from a non-affiliated entity. You sell your machining products to other internal divisions at a price that is equivalent to a market-based cost.This is example of which of the following types of business pricing?
A)Freight absorption pricing
B)Uniform geographic pricing
C)Transfer pricing
D)Zone pricing
E)Base-point pricing

Question

You are the general manager of the machining products division of a diversified manufacturing company in Des Moines, Iowa. You primarily produce machining products for sale to wholesalers around the world. However, you periodically get requests from other divisions in your company to purchase your products. You treat these purchase requests the same as a purchase request from a non-affiliated entity. You sell your machining products to other internal divisions at a price that is equivalent to a market-based cost.This is example of which of the following types of business pricing? ​
A)Freight absorption pricing
B)Uniform geographic pricing
C)Transfer pricing
D)Zone pricing
E)Base-point pricing

Quizplus · Accepted Answer

The given scenario is an example of transfer pricing, which refers to the pricing of goods and services between different units or divisions of the same company. In this case, the machining products division is treating the purchase requests from other divisions as if they were from an external company and selling the products at a market-based cost. This helps in correctly allocating the costs and profits within the organization. Option A, B, D, and E are different types of pricing strategies, but they are not relevant to the given scenario.

You Are the General Manager of the Machining Products Division