Question

If a corporation operates two divisions that supply one another, and each division is located in a different country, then transfer prices are: ___.

Answer 1

The correct answer is: set to allocate profit to the low tax rate country.

Step-by-step explanation:

Transfer pricing is the amount the one division of a company charges another for goods or services provided. Those divisions could be subsidiaries or affiliates of the same organization. To obtain the highest level of profit possible, firms tend to establish their divisions in low tax rate countries so they transfer price is the lowest available.