Indicate whether each of the following statements about transfer pricing is true or false.A cost-based transfer price has the advantage of promoting efficiency and fairness. ______A market-based transfer price may be adjusted to take into account cost savings that occur as a result of sales being made within the company. ______A decentralized company should adopt a policy of requiring divisions in the company to make sales to other divisions when such sales will benefit the company as a whole. ______The level of capacity at which the selling division is operating should not affect the level of the transfer price for a sale to another division in the same company. ______Companies with operations in two or more countries sometimes try to set transfer prices at a level that will reduce

Question

their overall income tax bill. ______

What will be an ideal response?

Answer 1

A cost-based transfer price has the advantage of promoting efficiency and fairness. F
A market-based transfer price may be adjusted to take into account cost savings that occur as a result of sales being made within the company. T
A decentralized company should adopt a policy of requiring divisions in the company to make sales to other divisions when such sales will benefit the company as a whole. F
The level of capacity at which the selling division is operating should not affect the level of the transfer price for a sale to another division in the same company. F
Companies with operations in two or more countries sometimes try to set transfer prices at a level that will reduce their overall income tax bill. T