Question

Multinational transfer prices are sometimes influenced by restrictions that some countries place on the repatriation of profits to the parent firm. Companies can minimize the effect of such restrictions by
A. Decreasing the prices of goods transferred into divisions in these countries.
B. Increasing the prices of goods transferred into divisions in these countries.
C. Charging less than the price that would be charged by an unrelated third party for goods transferred into divisions in these countries.
D. Keeping prices uniform throughout all domestic and foreign units within the company.

Answer 1

Answer: B. By increasing the prices of goods transferred into divisions in these countries.

Explanation:

Based on the information given, companies can minimize the effect of such restrictions through the increase in the prices of the goods that are transferred into divisions in these countries.

It should be noted that through the increase in the prices of goods which are transferred into divisions in these countries, then there'll be a reduction in the the profits. Due to this, there will be lower profits which would then be subjected to repatriation issues.

Therefore, the correct option is B.