TRANSFER PRICING

Group 6

Member of Group:
1. Indah Fatmawati
2. Nuryani Purnama Sari
3. Sri Ulina Ar.
4. Tita Nilasari
 Transfer Pricing
Definition Of Transfer Pricing
Transfer pricing are costs or prices charged for moving goods or services from one
division to another division in a company

The purpose of transfer pricing

1. To evaluate the division's achievements accurately

2. To align goals
3. To maintain division autonomy
 Transfer
Pricing
Determination
Method
 Transfer Pricing Determination Method
1. Variable Cost Method
Variable Cost Method is the transfer price determination which is the same as the
variable cost of the sales unit, standard + Profit. This is done if the seller has excessive
capacity. The main goal is to satisfy internal demand because the price is quite low.

2. Full Cost Method

Full Cost Method is transfer pricing based on full loading, and the most commonly used
because it is well understood and the information is readily available in the accounting
records. Weaknesses include fixed costs that affect short-term decisions.
 Transfer Pricing Determination Method
3. Market Price Method
Market Price Method is a transfer pricing based on market prices, and this method is most
preferred. The advantage is that the transfer price is quite objective. The disadvantage is that
the market prices for certain products / services are not available.

4. Negotiated Price Method

Negotiated Price Method is transfer pricing based on negotiations between 2 (two)
responsibility centers. This method is carried out if there is a significant conflict between the
two so that a price agreement is reached by both parties, so there is no need for arbitration.
The limitation is reducing the autonomy of these units.
 TRANSFER PRICING ADMINISTRATION

in almost all companies, business units negotiate transfer

prices with one another. Business units must also know the
Negotiation basic rules used as a benchmark in conducting these
negotiations.

Transfer Arbitration Arbitration can be done in several ways. In a formal system,

Pricing and Conflict both parties submit cases in writing to the mediator /
Administration Resolution conciliator. Conflict resolution can be done in four (4) ways,
namely forcing, persuading, offering and solving problems.

Product Class I covers all products where senior management wants

Classification to control the acquisition of resources.
Class II includes all other products.
The Relationship
between Transfer
Pricing and
Management Control
Systems
 Transfer pricing are one tool for
creating integration mechanisms within
companies that diversify their businesses.
Transfer pricing can influence
management decisions in determining the
price of a product or service to be sold to
the public.
It should be noted that if the transfer
price is set high then the selling price of
the product or service will also be high so
that it will make people not interested in
buying the product.
The Relationship between The Management Control System uses transfer prices to
coordinate the actions of various sub-units and to evaluate their
Transfer Pricing and performance.

Management Control The Management Control System must be very aligned with the
strategy and objectives of the company and the system must be
Systems designed to match the corporate structure and decision making
responsibilities of each manager.

The system should be simple to understand and easy to

administer. The system must be able to provide relevant
information needed by a profit center to be able to determine the
optimum trade off between costs and revenues.
 Conclusion

Transfer pricing are costs or prices charged for

moving goods or services from one division to another
division in a company. Transfer pricing are one tool
for creating integration mechanisms within companies
that diversify their businesses. Transfer pricing can
influence management decisions in determining the
price of a product or service to be sold to the public.
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YOU