ABSTRACT
The cost base used for applying the mark-up would be a matter of choice by the supplier. If only the variable costs were used, obviously a higher mark-up would be used than if all the costs were used. Sometimes it is difficult to allocate fixed costs across products, in which case the variable or possibly the production costs would be used. Marginal Pricing is a pricing method which is based on fixing a price which is anything above the variable costs of the product or service. It is a price which generates a contribution but it may not be enough to cover all the fixed costs and required profit. By transfer pricing is meant the price at which goods or services are transferred within a group or divisional structure. The methods of transfer pricing would be as follows: market price; cost price; market price less a percentage; cost price plus a percentage; and normal price.
