The price charged when one segment of a company provides goods or services to another segment of the same company is called a(n)?

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The price charged when one segment of a company provides goods or services to another segment of the same company is called a(n) transfer price

What Is Transfer Price?

Transfer price, also known as transfer cost, is the price at which related parties transact with each other, such as during the trade of supplies or labor between departments. Transfer prices may be used in transactions between a company and its subsidiaries, or between divisions of the same company in different countries.

  • Transfer prices that differ from market value will be advantageous for one entity, while lowering the profits of the other entity.
  • Multinational companies can manipulate transfer prices in order to shift profits to low tax regions.
  • To remedy this, regulations enforce an arm's length transaction rule that requires pricing to be based on similar transactions done between unrelated parties.

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