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TPRICE

This document discusses transfer pricing between divisions of a company. It presents a bargaining range model for setting an intra-company transfer price (tp) between a seller and buyer division. The tp must be between the seller's minimum price of variable cost plus unit resource costs and the buyer's maximum price of its willingness to pay. The document also examines capacity cases where total capacity (CQ) is greater or less than total demand (DQ), and whether any capacity will be idle depending on whether external (EDQ) or internal demand (IDQ) utilizes more of the available capacity.

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233 views1 page

TPRICE

This document discusses transfer pricing between divisions of a company. It presents a bargaining range model for setting an intra-company transfer price (tp) between a seller and buyer division. The tp must be between the seller's minimum price of variable cost plus unit resource costs and the buyer's maximum price of its willingness to pay. The document also examines capacity cases where total capacity (CQ) is greater or less than total demand (DQ), and whether any capacity will be idle depending on whether external (EDQ) or internal demand (IDQ) utilizes more of the available capacity.

Uploaded by

ssregens82
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLS, PDF, TXT or read online on Scribd
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AMIS 525

Transfer Pricing

A "Per Unit" View of Intra-company, Inter-division Transfers: The Company


component mp resources v v + mp

Seller
component

Buyer
product

S
tp

mp resources component

Seller Minimum

tp

tp

Buyer Maximum

Bargaining Range

General Transfer Pricing Rules: tp = mp Buyer Maximum tp = v + oc Seller Minimum

Capacity Cases: Quantity: CQ EDQ IDQ DQ = EDQ + IDQ Case I Case II CQ > DQ CQ < DQ Case IIA Case IIB EDQ >= CQ EDQ < CQ

Capacity Q External Demand Q Internal Demand Q Total Demand Q Idle Capacity

No Idle Capacity Partial Idle Capacity

(this viewpoint assumes that the internal demand is "in addition to" the external demand) Partition of CQ: EDQ Not Idle CQ - EDQ Idle
1/9/2014 + ^

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