It is often claimed that a two-part transfer pricing system offers a number of advantages to organizations which use it.
Which of the following statements is NOT an advantage of using a two-part transfer pricing system?
Transfers are made at the marginal cost of the supplying division and both divisions should be able to report profits from inter-divisional trading.
The receiving division is made aware of and charged for the full cost of obtaining intermediate products from other divisions.
It stimulates planning, communication and coordination amongst divisions.
The agreed fixed fee simply compensates the supplying division for incurring the fixed costs associated with the item transferred.
Submit