Extras Flashcards
Economic order quantity
2 x demand x order cost / holding cost
All squared by .5
Through put accounting formula
Selling price - direct materials all divided by constraint per unit
Determining all character of transactions
Operational > day to day
Tactical > fulfilment of objectives
Strategic > overal management
Business model always starting point. Functional and risk profiel are key in determining internal pricing policies
Analysis of functions, assets and risks of the parties involved
Internal policy dependent on entity characteristics of the parties involved
Analysing a company’s business model
Focus on value creation
Grey area between qualifications routine and entrepreneurship
Availability of compatible transactions
Whether independent third party would act the same
Routine company > low value adding
Hybrid > both
Entrepreneur > high risk high p&l
Available transfer pricing methods
Transactional methods > comparable uncontrolled price method
Resale price minus method
Cost plus method
Profit based methods > transactional net profit method
Profit split method
Arms length principle = price which is applied or proposed to be applied in a transaction begeeen persons other than associated enterprises in uncontrolled conditions
Cup method
Internal > manafacturer to distributor and customer
External> manafacter to distributors
And competitor to customer
Gross profit methods
Resale price minus:
Price - transfer price (you’re selling to new dept)
Cost plus:
Sale to group companies is rev - cost of goods sold which is the transfer price
Mark up kinda vibe
TnMM
Most commonly applied method
High degree of compatibility when using database
Applicable in typical principal structures with routine entities (that can be seen as least complex entities)
Profit split
Suitable in case transactions
Profit allocation based on relevant allocation keys
Full profitsplit vs residual profit split
Very limited guidance on it (very subjective)
