Characteristics of Dual Transfer Pricing

Characteristics of Dual Transfer Pricing

1.    Seller not Willing to Sell

In dual transfer pricing selling division are not willing to sell the goods at price offered by buying department. Selling department is interested at higher price than offered price by the purchasing department.

2.    Buyer is not willing to Buy

In dual transfer pricing, buyer is not willing to buy, because the price charged by the seller is regarded is too high. Buyer is interested at lower price than offered price. No transfer can take place due to this conflict.

3.    Head Quarter Buy & Sell

In dual transfer pricing, selling department transfer the goods at desired price to the head office, and head office then transfer the good to purchasing department at willing price (acceptable price to buyer). It means two different prices are used for transfer.

4.    Head office take disadvantage

In dual transfer pricing, head office treat the selling department profit as head office expenses. It means the buying department and selling department performance is not affected.

5.    Autonomy is at stake

In dual transfer pricing the autonomy of decision making department is at stake. Autonomy of decision making at divisional level is one of the fundamental objective of transfer pricing, which is at stake under this method.

6.    Complicated Accounting

Dual pricing complicate the accounting process and a cost are charged to the head office against profit of selling department is difficult to explain. Expense in head office account creates a lot of confusion.