U3db response 1 and 2

Response 1
Numerous problems arise with the use of the negotiated transfer pricing. When the negotiations drag on for too long, a company may fail to capitalize the favorable prices they may have sold their products in the market. Through concealing of information by middle managers who are in control of responsibility centers, the company may end up not benefiting fully from the intracompany trade. To avoid incidences of disagreements amongst the middle managers who are commanding the responsibility centers and facilitate quick decision-making process, the leading management must create tradeoffs and limitations for different circumstances such as how to approach issues to do with discount and the entire negotiation procedure (Stonciuviene and Uzkuraite 2015). According to Kachelmeier and Towry (2002), computerized negotiations tend to be less compelling compared to that of face to face. Negotiated transfer can be beneficial if those in charge can negotiate prices without any constraints or where the market has been subjected to an artificially induced bubble.
Response 2
The negotiation process involves sharing business information regarding the flow of cash and the local market. This aids in enhancing the effectiveness of the responsibility centers. When dialogues are happening, the middle managers involved may reach an agreement on the transfer price which may be less compared to the market price. The company managers have the responsibility to ensure that the transf…