2. Transfer Prices Transfer Price is the price one subunit charges for a product or service supplied to another subunit Of the same Organization

3. Transfer Pricing- 4 criteria's 1Goal Congruence 2 Management Effort 3 Subunit Performance Evaluation 4 Subunit Autonomy

4. Purpose of Transfer Pricing Multinational companies use transfer pricing to minimize their worldwide taxes, duties, and tariffs .

5. Transfer Costing- Methods 1Market Based 2Cost Based 3Negotiated

6. Market-Based Transfer Prices Transferring at Market Price is best if 1 Perfectly Competitive Market 2 Interdependence of Subunit is Minimal 3 No additional Cost-benefits to company

9. Transfers at Cost Variable costs Full cost Dual Pricing

11. Variable-Cost Pricing In situations where idle capacity exists, variable cost would generally be the better basis for transfer pricing and would lead to the optimum decision for the firm as a whole.

13. Dysfunctional Behavior Virtually any type of transfer pricing policy can lead to dysfunctional behavior – actions taken in conflict with organizational goals .

16. Multinational Transfer Pricing Example Which transfer price should be chosen? Rs100 Why?

17. Multinational Transfer Pricing Example Income of A is Rs40 higher: 25% × 40 = (Rs10) higher taxes Income of B is Rs40 lower: 50% × 40 = Rs20 lower taxes Import duty paid by B: 20% × 40 = (Rs8)  Net savings = Rs2

18. Global Pricing Considerations