A Transfer Pricing Policy Based on Market Price

question 13

Multiple Choice

A transfer pricing policy based on market price:

• A) Is best because the market price is always objective and easily obtainable.
• B) May result in suboptimal decision making for the company as a whole.
• C) Maximises total organisational profit.
• D) Is the only alternative accepted by the Australian Taxation Office.

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Definitions:

Marketing Function

A role or operation that relates to promoting, selling, and distributing a product or service, including market research, advertising, and sales.

Ownership Utility

The value or benefit that comes from owning a product or service, above and beyond its functionality or use.

Place Utility

The value added to products by having them available at a location where they are needed or wanted by consumers.

Time

A continuous, measurable quantity in which events occur in a sequence from the past through the present to the future.