Transfer Pricing - What are transfer prices used for?

Q: What are transfer prices used for?

A transfer price is used to determine the cost to charge another division, subsidiary, or holding company for services rendered. Typically, transfer prices are priced based on the going market price for that good or service.

Answer

For the purpose of calculating how much to charge one holding company, subsidiary, or division for services provided, a transfer price is utilized. The current market value of an item or service is the standard basis for determining its transfer price.

Transfer Pricing - What are transfer prices used for?

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