Why can the level of the transfer price affect the overall company?
A)The higher the transfer price, the higher the operating income.
B)It may affect the taxes paid by the multinational company.
C)The lower the transfer price, the lower the total costs.
D)It may affect the company's accounts receivable.

Question

Quizplus · Accepted Answer

Transfer pricing can affect the taxes paid by a multinational company as different countries have different tax laws and regulations. If the transfer price is set too high, it may result in higher profits being recorded in a high-tax country, leading to higher taxes paid. On the other hand, if the transfer price is set too low, it may attract scrutiny from tax authorities and could result in penalties or fines. Therefore, setting the right transfer price is important for managing the tax liabilities of a multinational company.

Why Can the Level of the Transfer Price Affect the Overall