Multiple choice Transfer pricing

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Quick Exercises – Transfer Pricing ACCOUNTING, FINANCE AND CONTROL 2018-2019 QUICK EXERCISES – TRANSFER PRICING For each question, select the correct answer (only 1 answer is correct) 1. In which of the following cases, the transfer price based on the market is difficult to apply:  When internal negotiation costs are likely to be high  When the selling units have a shortage in production capacity  When the products/services involved in the transactions are characterized by a market with unstable prices  When the transfer price has fiscal implications 2. How does the Dual Transfer Price scheme work?  By setting a unique reference price at which the product/service can be exchanged in internal transactions based on the external market  By correcting the market price, taking into account lower transaction and administrative costs for internal transactions  By averaging the price of the market, when there is price-market variability  By defining different selling and purchasing prices for the internal transactions, managing the difference as a corporate account. 3. What of the following is a disadvantage of a Negotiated Transfer Price?  The integration among business units decreases  Negotiated transfer prices cannot be used in turbulent contexts  These systems should be used coupled with market-based Transfer prices  Negotiated Transfer Prices usually might lead to a suboptimal saturation of the production capacity of the selling units 4. What of the following information is not relevant for selecting the most appropriate Transfer Price System?  The fact that Business Units are in different countries, having to deal with different fiscal policies  The turbulence of the external context of the companies  The desired level of autonomy of the different…