Hybrid transfer prices take into account both cost and market information.

Question

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Hybrid transfer prices consider both the cost of the product or service and the prevailing market prices. Companies use a combination of cost-based and market-based transfer pricing methods to ensure that internal transactions between different units of the same organization are fair and equitable. For example, the parent company may set a transfer price that includes a markup on its cost (to cover overheads and profits) but also takes into account the prices at which similar products or services are sold in the external market. This approach helps to promote efficiency and accountability across the organization while also encouraging competitiveness and innovation.

Hybrid Transfer Prices Take into Account Both Cost and Market