Goliath Transfer Pricing Case. An Instructional Case by Charles Bailey & Denton Collins. Objectives and Features. Illustrates the issues associated with setting a firm’s transfer pricing policies.
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An Instructional Case
Charles Bailey & Denton Collins
In keeping with maximum autonomy, you [the CEO] allow divisions to accept or reject any offer to buy or sell to another division. However, whenever an internal transaction does occur, the price must follow guidelines that you set. Here are the options you are considering.
Transaction 1: Plastics sells cases to Metals
Transaction 2:Electronics sells sensors to Plastics
+ opportunity costs:2000 (80-43)=74,000
Total $160,000 (NOTE: =2000*$80)
Transaction 3: Metals sells brackets to Electronics
*See Overview of Incentives and Predicted Outcomes