Assignment 6b Scenario Essay Example | Topics and Well Written Essays - 750 words

Assignment 6b Scenario - Essay ExampleThis approach is loosely favorable to a manufacturing division but not for a retail division.The second approach is the negotiated cost approach. In this approach, a manufacturing division and a retail division both negotiate a impairment. The monetary value of a product is set so that all of the variable costs of the manufacturer are cover and the set is lower than the market price, but the manufacturer still makes a profit. This system is commonly utilise when a manufacturing division has unsold inventory, as it can still wander products by using this mode. This method is also more favorable to the retailer than the market price approach.The final approach is the cost price approach. In this method, a product is sold to the retail division at its standard cost or its actual cost. This price may even not be enough to cover all of the expenses of the manufacturing division. This method is the most profitable for the retail division, and it is unlikely to be supported by anyone in charge of manufacturing unless in that location is low demand for the manufacturers product or a massive amount of superabundance capacity at the manufacturers facility.There are several reasons why market price approach is the transfer pricing approach that should be used for Pharmafins brand-new modules. One of the modules bequeath be produced internally, and to produce it, the companys production facilities will need to add new equipment. product staffing also needs to be increased by ten percent. These large expenditures will make it incumbent to use the pricing method that causes the company to receive the highest price so that it can cover the new expenditures. The marketing department shows that there is a high level of consumer demand for the new machinery. Because of this, the new machinery should sell even if it is sold at a higher price. The other two pricing approaches could lead to a lower price, but they might also lead t o revenues that are inadequate to cover