Page 138 - MAC4861_2 Costing class slides part 2
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TRANSFER PRICING
Maximum Transfer Price
The maximum transfer price is the maximum that the
receiving/buying division can pay without making a loss.
Remember if an external market exists the maximum transfer
price can never be more than what the receiving division can
purchase it at externally (less any savings on transport
expenses).
No external market (the receiving division cannot purchase
externally:
Maximum transfer price =
Receiving divisions selling price
Less: Receiving divisions incremental costs (fixed and variable)
This will be the transfer price where the receiving division will
breakeven (no profit or loss).
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