Answer and Explanation

Answer and ExplanationAnswer and Explanation:

Answer:

A) The possible cost-minimization objectives that a multinational company might wish to achieve through transfer pricing include:

Reducing the import duties to the minimum.Finding different ways to conquer the restrictions related to the repatriation of profits i.e getting the profits back to the home country.Preventing the cash flows from the devaluation of the currency.Trying to improve the competitive level of operations engaged in foreign.

B) The performance evaluation objective of transfer pricing is:

The main objective is to use intercompany transfer prices to engage in performing sales, costs, income measures, etc. The price should be fixed in such that both the seller and the buyer are benefited fairly and also these prices should be accepted by both the parties.

C) Reasons for why there is often a conflict between the performance evaluation and cost- minimization objectives of transfer pricing are:

Basically, in order to meet an objective of cost-minimization, a discretionary transfer price is usually dictated by the headquarter which will obviously not be accepted by one of the parties to the intercompany transaction which results in a conflict.

There could be various reasons for not agreeing to the discretionary price and one of them could be the deprivation of the incentive-based plan.

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