Indicate Whether Each of the Following Statements About Transfer Pricing

question 82

Short Answer

Indicate whether each of the following statements about transfer pricing is true or false.
A cost-based transfer price has the advantage of promoting efficiency and fairness.______
A market-based transfer price may be adjusted to take into account cost savings that occur as a result of sales being made within the company.______
A decentralized company should adopt a policy of requiring divisions in the company to make sales to other divisions when such sales will benefit the company as a whole.______
The level of capacity at which the selling division is operating should not affect the level of the transfer price for a sale to another division in the same company.______
Companies with operations in two or more countries sometimes try to set transfer prices at a level that will reduce their overall income tax bill.______

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Definitions:

Productive

The efficiency at which individuals or systems generate outcomes or services relative to inputs.

Healthy Disputes

Conflicts or disagreements that are managed and resolved in constructive ways, contributing to personal or group development.

Competition

The rivalry among businesses or individuals for resources, recognition, or gain, where the success of one is achieved at the expense of the success of competitors.

Proposal

A plan or suggestion, especially a formal or written one, put forward for consideration or discussion by others.