Which of the Following Is a Disadvantage of Pursuing a Transfer

question 77

Multiple Choice

Which of the following is a disadvantage of pursuing a transfer pricing policy?

• A) It is not useful in shifting earnings from a high-tax country to a low-tax one.
• B) Transfer pricing does not treat each subsidiary as a profit center.
• C) It is not effective when significant currency devaluation is expected.
• D) A transfer price policy cannot be used to move funds when dividends are restricted.

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Definitions:

Merchandise Inventory

Goods that a company holds for the purpose of resale in the ordinary course of business, often considered as current assets on the balance sheet.

Cost of Goods Sold

Expenses directly arising from the production of goods a company offers for sale, involving labor and materials.

Direct Costs

Costs that can be traced directly to the production of specific goods or services, such as raw materials and labor.

Direct Manufacturing Cost

Expenses directly associated with the production of goods, including labor and materials.