Transfer Pricing
As Sach described the transfer pricing policy, purely domestic transfers utilized a full standard cost price method while foreign transfers used an arm's-length market price method. This was the general rule, but the system was quite flexible, which enabled a quick response to changing market conditions. document processing industry was extremely competitive, and Xerox management realized that they must respond to various global market pressures and competitive challenges. A manager from the Xerox Brazilian operation asserted the following: "The transfer pricing system is designed to attack the market place. We drive the products in the market place, and Xerox knows the source of the revenue is the customer."
The domestic transfer pricing was less complicated than international Situation. The controller for the US customer operations explained