Transfer pricing
, TRANSFER PRICE RANGE
If you have a scenario where there will be partial external sales with NO opp cost and partial with opp cost you will have
2 transfer price ranges
➔ This is how I understand how to do a transfer price range!
NO OPP COST :
MINIMUM (transferor) MAXIMUM (transferee)
Cost of transferring internally: LOWER OF:
➔ Variable cost of product for the transferor + ➔ Net marginal revenue
transport to transfer internally for transferor ➔ Market price (price of purchasing the product
that is being transferred EXTERNALLY)
Variable cost is the price that the TRANSFEROR paid to Net marginal revenue
acquire the products for transfer ( FOR THE RECIEVER OF THE TRANSFER)
➔ SELLING PRICE
externally from the receiver unit (person who is
getting transfer )
➔ LESS VC
to sell those units externally EXCLUDING the cost
that transferor paid to acquire the products
SO if the receiver had to pay additional packaging
to sell the products that will be the VC
With opportunity cost:
MINIMUM MAXIMUM
Variable cost + opp cost LOWER OF :
➔ Net marginal revenue
➔ Market price
OPPORTUNITY COST: Same calculations above = this is for the TRANSFEREE
➔ Selling price that TRANSFEROR could sell in an
external market
➔ LESS: additional VC to sell this product externally
➔ LESS: variable cost that the TRANSFEROR had to
pay to purchase the products to sell
Variable cost
➔ Cost to purchase the products to sell
➔ PLUS cost of transport for INTERNAL transfer
, TRANSFER PRICE RANGE
If you have a scenario where there will be partial external sales with NO opp cost and partial with opp cost you will have
2 transfer price ranges
➔ This is how I understand how to do a transfer price range!
NO OPP COST :
MINIMUM (transferor) MAXIMUM (transferee)
Cost of transferring internally: LOWER OF:
➔ Variable cost of product for the transferor + ➔ Net marginal revenue
transport to transfer internally for transferor ➔ Market price (price of purchasing the product
that is being transferred EXTERNALLY)
Variable cost is the price that the TRANSFEROR paid to Net marginal revenue
acquire the products for transfer ( FOR THE RECIEVER OF THE TRANSFER)
➔ SELLING PRICE
externally from the receiver unit (person who is
getting transfer )
➔ LESS VC
to sell those units externally EXCLUDING the cost
that transferor paid to acquire the products
SO if the receiver had to pay additional packaging
to sell the products that will be the VC
With opportunity cost:
MINIMUM MAXIMUM
Variable cost + opp cost LOWER OF :
➔ Net marginal revenue
➔ Market price
OPPORTUNITY COST: Same calculations above = this is for the TRANSFEREE
➔ Selling price that TRANSFEROR could sell in an
external market
➔ LESS: additional VC to sell this product externally
➔ LESS: variable cost that the TRANSFEROR had to
pay to purchase the products to sell
Variable cost
➔ Cost to purchase the products to sell
➔ PLUS cost of transport for INTERNAL transfer
