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فيديو شرح Transfer Price Explained. Intermediate or Intermediate Market ضمن كورس محاسبة التكاليف شرح قناة Farhat Lectures. The # 1 CPA & Accounting Courses، الفديو رقم 43 مجانى معتمد اونلاين
How does transfer pricing work with and without an intermediate market? This CPA Exam BAR lecture explains transfer pricing in a decentralized company, focusing on performance measurement, the agency problem, and how the transfer price affects each division's profit without changing total company profit. It shows why the market price is optimal when an intermediate market exists and why variable cost is used when it does not. Ideal for CPA and CMA candidates studying managerial accounting, and for accounting students learning divisional performance.
Try it free at farhatlectures.com — interactive exercises, lectures, simulations, cases, multiple choice, and AI tools for CPA, CMA, EA and students.
Video Timeline & Key Concepts:
0:00 — Introduction
0:30 — Definition and purpose: how transfer prices affect ROI and residual income
2:31 — The agency problem in internal pricing
6:08 — Numerical example: transfer price shifts divisional profit but not total profit
12:00 — Optimal transfer price when an intermediate market exists
15:53 — Optimal transfer price when there is no intermediate market
Frequently Asked Questions:
Why do transfer prices matter for performance measurement?
Transfer prices determine how much revenue and cost each division reports, which directly affects metrics like return on investment and residual income. Because divisions are often evaluated as profit centers, the transfer price influences how managers are judged.
What is the agency problem in transfer pricing?
The agency problem arises when a division manager sets or negotiates a transfer price to benefit their own division rather than the company as a whole. This can lead to decisions that improve divisional metrics while hurting overall company results.
Does the transfer price change total company profit?
No. A transfer price shifts profit from one division to another, but the total profit of the parent company stays the same. This is why transfer pricing is primarily a performance and motivation issue rather than a total-profit issue.
What is the optimal transfer price when an intermediate market exists?
When an external market exists for the product, the market price is generally the optimal transfer price. It treats both divisions fairly and removes the need for complex internal negotiation.
What transfer price is used when there is no intermediate market?
When no external market exists, the optimal transfer price is typically the selling division's variable cost. This gives the buying division flexibility to respond to final product prices while keeping the overall company profitable.
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