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Case
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Reference no. A190
Published by:
Stanford Business School (2004)
Version:
12 February 2007
Length:
13 pages
Data source:
Field research

Abstract

In December 2003, the management teams at the automotive and steel businesses of The Timken Corporation, headquartered in Canton, Ohio, were principally in agreement that market price was the appropriate instrument for valuing internal steel transfers. At the same time, both management teams had reservations about details of the implementation of market-based transfer pricing as it stood. Students are asked to assess whether the transfer pricing policy for steel transfers inhibited the automotive division from exercising its market power as a purchaser of bearings quality steel, to comment on the usefulness of the ''Minimum Rule'', assess Timken''s policy of market-based transfer pricing rules for steel, and compare cost-based transfer prices to market-based prices.

Topics

Accounting; Transfer pricing

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