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TRANSFER PRICING pt. 2 - Coggle Diagram

- - - - causes confusion if transfers are between > 2 div
      - considered artificial
      - reduces div incentive to compete effectively
      - top-lvl managers don't like double-count int profits - creates false impression of div profits
  - - - fixed fee is based on RD's ave capacity used of TD
      - eg. RD uses 25% of TD capacoty. Fee = 25% of TD's FC
        
        desired return on capital
      - represents "long-run marginal cost"
        *change in long-run tot cost of producing a G/S, resulting
        from a change in output produced
    - - transfer is @ TD's variable costs
      - both divisions could report a profit
      - stimulates planning, communication, coordination among divs