Transfer Pricing Management Information Systems

This paper presents a conceptual development of a cost-based transfer pricing system for application to the services of the corporate Management Information Systems (MIS) Department. The proposed system is based on a five part transfer price. A charge is levied for each of four groups of costs differentiated according to cost behavior and truceability. A fifth charge is a noncost-based congestion charge designed to equalize short-run fluctuations in demand for the computer facilities. The transfer pricing system is designed to be consistent with accounting theory yet operational within the constraints imposed by the environment of MIS.