The Same Difference? A Transfer‐Pricing Case

This case requires you to consider the complexities of transfer pricing. The case is based on an actual situation that occurred between a customer sales representative and a client at an auto dealership. In this case, you will be asked to assume several different roles and attempt to resolve transfer‐pricing issues for which there are no “clear‐cut” solutions. This case includes three sections. First, you will read assigned background material on transfer pricing, read a short introduction to the case, and become familiarized, through class discussion, with how auto dealerships operate with respect to new and used car sales. Second, you will analyze additional information so that you may assume a particular role, such as new car manager or used car manager. Third, you will assume the role of the newly appointed controller of the dealership and attempt to address and resolve the transfer‐pricing issues in this case. By completing this case, you will develop an understanding of alternative transfer‐pricing policies (market price, acquisition cost, negotiated price) and the impact of transfer‐pricing policies on various parties, as well as come to appreciate how bonus structures may influence managerial decision making.