Transfer Pricing - Perfect Market

NotesObjective Test

Transfer Price - Perfect External Market

Remember:

This is one with no limitations in supply and demand

Perfect Market - but Division A has Spare Capacity

  • Anything above or equal to A's Variable Cost

Perfect Market - but Division A has NO Spare Capacity

  • The Market Price is all A would accept (as it would otherwise sell to the external market) - less any savings from selling internally

NotesObjective Test