The Text Notes That There Are Various Objectives of Transfer

question 34

Essay

The text notes that there are various objectives of transfer pricing. This raises the possibility of using multiple transfer pricing alternatives. For example, an organization could use one transfer pricing alternative for domestic transfers and another alternative for transnational transfers.
Required:
1. Provide a reason why an organization might choose a particular transfer pricing alternative for domestic transfers and a different transfer pricing alternative for international transfers.
2. Provide a reason why an organization may not want to use two different transfer pricing systems, one for domestic transfers and another for international transfers.

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Definitions:

Safety Stock

Extra inventory carried to prevent stockouts in the event of heavy use or delayed delivery.

Working Stock

Working stock refers to the inventory that is readily available for use or sale, excluding any safety stock kept in reserve to cover potential shortages.

Collection Period

The average number of days it takes for a company to collect payments owed by its customers.

Bad Debts

Money owed to a company that is unlikely to be paid by the debtor, often resulting in a write-off for the company.