Explain the issues that surround transfer pricing within organizations and give at least three examples of different options a firm may consider when trying to arrive at a fair transfer price for a product.
Cost Accounting I
DQ1 Allocation of Costs Reflection [WLOs: 1, 2, 3, 4] [CLOs: 3, 6]
Prior to beginning work on this discussion forum, read Chapter 22 in your textbook.
Write: Make sure your response addressing the following question is more than 200 words and include an in-text citation from the reading material where appropriate.
Transfer pricing between divisions in a decentralized organization can be a hot topic of conversation. Explain the issues that surround transfer pricing within organizations and give at least three examples of different options a firm may consider when trying to arrive at a fair transfer price for a product. List the pros and cons for the selling division as well as the purchasing division for each scenario presented.
DQ2 Cost Drivers Scenario [WLOs: 1, 2, 3, 4] [CLOs: 3, 6]
Prior to beginning work on this discussion forum, read Chapters 10, 11, and 13 in your textbook.
Write: Make sure your response addressing the following question is more than 200 words and include an in-text citation from the reading material where appropriate.
A manager in your organization tells you over coffee one morning, “Differential costing is easy; variable costs are the only costs that are relevant.” As the organization’s accountant, how would you respond to this statement?
Later in your conversation this same manager opens a folder and produces a document he just received regarding a special order at a price that he believes is “below cost.” The manager is opposed to accepting orders of this nature because he feels every sale needs to carry a fair share of full costs in order to keep the company from failing. What would be your reply to this manager?
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