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Chapter 6 Transfer Pricing Transfer pricing is an area of cost accounting where a multi-divisional firm uses the outputs of one division or profit centre as inputs for another division or profit centre. Usually a transfer price is set at some level between the preferred prices of both divisions. Transfer prices represent the value that is added in each profit centre throughout the production process. Fundamental Principle of Transfer Pricing-Transfer prices should be similar to the price that would be charged if the product were sold to outside customers or purchased from outside vendors, which is known as sourcing. Cost Based Transfer Prices-are used when no price is readily available in the outside market.
Approximate Word count = 438
Approximate Pages = 1.8
(250 words per page double spaced)
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