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Nowaday, the multinational corporations have very important role in global economy. There are many ways to the companies grow and one of them is
Nowaday, the multinational corporations have very important role in global economy. There are many ways to the companies grow and one of them is vertically growing. It means that the companies expands in the direction of either their supplier or customer. For example, Thong Nhat corporation is the biggest bicycle manufacturer in Vietnam and they can acquire the commercial department or outsource selling activities for external suppliers. When the company chooses to distribute their products by themselves, the managers must answer the questions about unit selling price between manufacturing department and selling department which is transfer price or internal selling price. Different to external selling price, the objective of transfer price is not only maximizing profit of the company but also other purposes, such as measuring the divisional performance accurately.... Therefore setting a transfer price is complicated because of competing interests among manufacturing and selling department as shown in figure 1. Firgure 1. External Supplier Manufacturing Deptartment Commercial Deptartment Customer Thongnhat Based on the situation of Thong Nhat corporation shown in firgure 1, pointing out the problems of setting transfer price which managers of the company can be faced off. Brief comment the advantages and disadvantages of setting transfer price method and choose the appropriate method for dealing with the problems pointed out before.
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