Think again about the road repair company described in Activity 17.1 It has set up two divisions:
Question:
Think again about the road repair company described in Activity 17.1 It has set up two divisions: one being motorway repairs and the other being town street repairs.
The division carrying out town street repairs has started processing its own asphalt surfacing using specialist equipment. From time to time the motorway division buys asphalt surfacing from the town repairs division. Explain the potential problems faced in deciding on a transfer price for this service.
Activity 17.1
A road repair company has set up two divisions: one is motorway repairs and the other is town street repairs. Write down the advantages and disadvantages of establishing these divisions.
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Transfer pricing refers to the cost that one division of a company charges another for a product or service Its an internal process but can present se...View the full answer
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