Question

Which of the following is affected by transfer price? Cost of the buying division Conversion cost of the buying division Market prices of the product of the selling division Manufacturing cost of the selling division

Answer 1

Cost of the buying division is affected by transfer price

Explanation:

When goods or services are transferred from one segment to another segment but in same company is mainly known as transfer price. It is also known as artificial price. It is duty of accountants keep record the transfer price as a revenue of the producing segment and as a cost, or expense, of the receiving segment.

On some measure of profitability generally some segments are evaluated. Selling and buying segments are affected by transfer price. Higher transfer price is good for the seller and the lower transfer price is better for the buyer.