There Are a Series of Key Drivers Behind Transfer Pricing

question 1

Multiple Choice

There are a series of key drivers behind transfer pricing decisions of U.S.-based multinationals.The most important of these drivers is thought to be:

• A)competition in the foreign country.
• B)economic conditions in the foreign country.
• C)price controls.
• D)exchange controls.
• E)market conditions in the foreign country.

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Definitions:

Variable Expenses

Costs that vary in direct proportion to changes in the level of activity or volume of production.

Fixed Expenses

Obligations that remain constant in total regardless of changes in business activity levels, such as lease payments and salaries.

Cost Formula Equation

An equation that determines the total cost based on fixed costs, variable rate per unit of activity, and the level of activity.

High-low Method

A technique used in cost accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.