Which of the following is an example of transfer pricing?
(A) The price charged by a company for a good or service provided to its subsidiaries
(B) A company selling its product at a minimum price to undercut a global competitor
(C) A company transferring the right to use its intellectual property to another company
(D) The profits gained from pricing by a company affected by international currency fluctuations - HSC - SSCE Business Studies - Question 10 - 2002 - Paper 1
Question 10
Which of the following is an example of transfer pricing?
(A) The price charged by a company for a good or service provided to its subsidiaries
(B) A company selli... show full transcript
Worked Solution & Example Answer:Which of the following is an example of transfer pricing?
(A) The price charged by a company for a good or service provided to its subsidiaries
(B) A company selling its product at a minimum price to undercut a global competitor
(C) A company transferring the right to use its intellectual property to another company
(D) The profits gained from pricing by a company affected by international currency fluctuations - HSC - SSCE Business Studies - Question 10 - 2002 - Paper 1
Step 1
A) The price charged by a company for a good or service provided to its subsidiaries
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Answer
Transfer pricing refers to the pricing of goods and services sold between controlled or related entities. This includes the pricing strategy used for transactions where one subsidiary sells to another within the same corporate group. Therefore, option A is an example of transfer pricing.
Step 2
B) A company selling its product at a minimum price to undercut a global competitor
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Answer
This statement pertains to pricing strategies associated with competitive disadvantages and does not relate to transfer pricing as defined in international business practices.
Step 3
C) A company transferring the right to use its intellectual property to another company
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Answer
While this could involve pricing considerations, it represents a licensing agreement rather than traditional transfer pricing, which is typically concerned with tangible transfers.
Step 4
D) The profits gained from pricing by a company affected by international currency fluctuations
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This statement refers to the financial impact of currency exchange rates on profits and does not describe transfer pricing itself.
