Calculate the increase or decrease in profits for the three divisions and the company as a whole (four separate computations) if the agreement is enforced. Explain your thought process, comment on the situation, and make a suggestion based on the computations you have made.
•Evaluate and discuss the implications of the following transfer pricing policies: ?Transfer price = cost plus a mark-up for the selling division
?Transfer price = fair market value
?Transfer price = price negotiated by the managers
•Why is transfer pricing such a significant issue both from a financial and managerial perspective