Professional Documents
Culture Documents
Example 1
Take the following scenario shown in Table 1, in which Division A makes
components for a cost of $30, and these are transferred to Division B for $50.
Division B buys the components in at $50, incurs own costs of $20, and then
sells to outside customers for $90.
As you can see, therefore, transfer prices can have a profound effect on group
performance because they affect divisional performance, motivation and
decision making.