What is Transfer Price in Retail? Explained

A transfer price is the internally set price at which goods or services are transferred between different units or divisions within the same company. This is particularly relevant in vertically integrated businesses or those with multiple departments. The transfer price is used to determine the cost of goods or services for the receiving unit, influencing financial reporting and performance evaluation. Establishing a fair and transparent transfer price is crucial for maintaining accurate accounting records and ensuring that each unit within the organization is assessed based on its actual contributions to the overall business.