Which of the Following Statements About Transfer Pricing Is True

question 13

Multiple Choice

Which of the following statements about transfer pricing is true?

• A) The lower the transfer price, the larger the gross profits of the transferring division relative to the receiving division.
• B) Very high markup policy used in the transfer pricing to a subsidiary makes the adjusted present value (APV) of that subsidiary's capital expenditure appear more attractive.
• C) Very low markup policy used in the transfer pricing to a subsidiary makes the adjusted present value (APV) of that subsidiary's capital expenditure appear less attractive.
• D) The higher the transfer price, the larger the gross profits of the transferring division relative to the receiving division.