Using the Comparable Profits Method of Transfer Pricing,the Transfer Price

question 37

Multiple Choice

Using the comparable profits method of transfer pricing,the transfer price is determined by:

• A)backing into it based on objective measures of sales,operating expenses,and a reasonable profit margin on sales.
• B)adding a standard profit margin to the operating expenses of the buying division.
• C)dividing a reasonable amount of profit between the selling and buying divisions.
• D)comparing the normal profits of the selling and buying divisions and basing the price on the highest margin.

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Definitions:

Consumers

Individuals or groups who purchase goods and services for personal use.

Clearing House Interbank Payments System

An electronic payment system operated by major banks for the purpose of settling transactions among themselves.

Society of Worldwide Interbank Financial Telecommunications

An international organization that provides a network for financial institutions globally to send and receive information about financial transactions.

Client Accounts

Financial accounts held by a financial institution on behalf of its clients, often used for the safekeeping of money, securities, or other assets.