Question

Transfer pricing is a method used to price a product at each stage of production in order to

-determine whether a firm should make or buy a component product.

-determine the correct value of a product as it moves from one stage of production to another.

-minimize a multinational firm's tax liabilities.

-All of the above

Answer 1

Transfer pricing is a method used to price a product at each stage of production and can be used to determine the correct value of a product, minimize tax liabilities, or make decisions about component product acquisition. Option D is correct.

Step-by-step explanation:

Transfer pricing is a method used by multinational firms to price a product at each stage of production. It is used to determine the correct value of a product as it moves from one stage of production to another. This method helps in making decisions whether a firm should make or buy a component product, based on the costs involved.

Transfer pricing also has the potential to minimize a multinational firm's tax liabilities. By setting the prices for goods and services between related entities within the firm, the firm can allocate profits to low-tax jurisdictions, reducing its overall tax burden.

Therefore, the correct answer to the question is: All of the above.