Explain the objectives of transfer pricing and describe the advantages and disadvantages of various transfer pricing alternatives.

Strategic performance measurement: Investment centers and transfer pricing

After studying this chapter, you should be able to

Explain the use and limitations of return an investment for evaluating the short-term financial performance of investment centers.

Explain the use and limitations of residual income for evaluating the short-term financial performance of investment centers.

Explain the use and limitations of economic value added for evaluating the short-terrn finandai performance of investment centers.

Explain the objectives of transfer pricing and describe the advantages and disadvantages of various transfer pricing alternatives.

Understand important internationa/ issues that arise in transfer pricing.