Fifth edition Alnoor Bhimani Charles T. Horngren Srikant M. Datar Madhav V. Rajan Farah Ahamed

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A general guideline for transfer-pricing situations

Negotiated transfer prices
Negotiated transfer prices typically fall between the floor (incremental cost plus opportunity cost) and ceiling (market price) prices. As the text points out, exactly where the negotiated transfer price falls within this range depends on the relative bargaining strength of the subunits. If performance evaluations are based on subunit operating income, using negotiated transfer prices means that relative negotiating strength will affect these evaluations.
A general guideline for transfer-pricing situations

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