Divisional Transfer Pricing

Chapter 8: Key Points

• Definition: Divisional transfer pricing is the process of value transfer between different departments within a company.
• Importance: This chapter helps in understanding the cost and benefits of internal transfers within a company.

Main Points

• Transportation Process:

  • Fund transfer and its process.
  • How funds are withdrawn from Golf (Golf Congress) banking.
  • Trying various capabilities.

• Transfer Pricing:

  • Example of ABC Company:
    • Malwa ABC, Plastic Hotel.
    • Requirements for transfer pricing.

• Profit Center:

  • Divisions were previously considered only as cost centers, now they are also profit centers.
  • Encouragement for competition between divisions.

Methods of Transfer Pricing

• Internal Transfer:

  • How a division sells its product to another division.

• Minimum and Maximum Transfer Price:

  • Minimum: Selling (at least price)
  • Maximum: Buying (at the maximum price)

Practical Examples

• ABC Company:

  • Division of variable cost and fixed cost.
  • Expenses incurred during internal transfer.

• Valuation within Company:

  • Assessment of profit and loss for all divisions.

Conclusion

• Golf Congress:

  • The most important topic, understanding the impact of internal transfers on companies.

• Key Learnings of the Chapter:

  • It is essential to assess the profit and loss of companies through transfer pricing.
  • Proper evaluation increases the competitiveness of companies.