Dual transfer price
A dual transfer price is an arrangement in which the selling division records an internal transfer at a market or full-cost price while the buying division records it at marginal cost; the difference is absorbed centrally, motivating.
FrameworkTransfer pricing
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An intermediate product has a marginal cost of €40 and a market price of €70. Under a dual transfer price, the buying division records the transfer at €40, so its decisions reflect true incremental cost, while the selling division records €70, so its profit is not depressed. The parent absorbs the €30 gap centrally, then eliminates it on consolidation.
Where it fits
SubjectManagerial AccountingAdvancedTopicTransfer PricingAdvanced