Question

Discuss the pricing basis on which divisions should offer to transfer goods in order that corporate profit-maximizing decisions should take place.

Word count for this discussion response - 150 words maximum

Answer 1

The value used to esteem the exchange of merchandise or administrations between divisions inside a similar organization is known as an exchange cost. A few distinct methodologies can be utilized to build up move costs between divisions. The objective is to build up an exchange estimating strategy that urges directors to do what is to the greatest advantage of the organization while likewise doing what is to the greatest advantage of the division supervisor (this is called objective coinciding). The overall financial exchange estimating rule endeavors to build up rules for divisions to amplify by and large organization benefit. This standard expresses the exchange cost ought to be set at differential expense to the selling division (ordinarily factor cost), in addition to the open door cost of making the deal inside (none if the merchant has inactive limit or selling value short differential expense if the dealer is at limit). This standard is summed up in "Key Equation: Economic Transfer Pricing Rule."