Which of the following is not true about international transfer price for a multinational firm?
A. Allows the firm to *uate each division
B. Allows firms to correctly price products in each country in which it operates
C. Provides each division with a profit-making orientation
D. Allows firms to attempt to minimize worldwide taxes
Answer (B) is correct .
The calculation of transfer prices in the international arena must be systematic. A scheme for calculating transfer prices for a firm may correctly price the firm’s product in Country A but not in Country B. The product may be overpriced in Country B, causing sales to be lower than anticipated; or, the product may be underpriced in Country B, and the authorities may allege that the firm is dumping its product there.
The calculation of transfer prices in the international arena must be systematic. A scheme for calculating transfer prices for a firm may correctly price the firm’s product in Country A but not in Country B. The product may be overpriced in Country B, causing sales to be lower than anticipated; or, the product may be underpriced in Country B, and the authorities may allege that the firm is dumping its product there.
