Which of these contract terms reduce transfer pricing problems?
A)Double markups and two-part pricing
B)Quotas and double markups
C)Exclusive territories and two-part pricing
D)Two-part pricing and quotas

Question

Quizplus · Accepted Answer

Two-part pricing and quotas can help reduce transfer pricing problems. Two-part pricing involves charging a fixed fee for access and then charging per unit of output, which reduces the incentive for either party to manipulate transfer prices. Quotas limit the amount of product that can be transferred between related entities, reducing the need for transfer pricing altogether. Double markups and exclusive territories do not necessarily address transfer pricing problems.

Which of These Contract Terms Reduce Transfer Pricing Problems