Monday, October 14, 2013

For Tomorrow's Review Session

Please come prepared with your questions.  This session will be most useful if you drive it.  I will go over solutions to last year's midterm, but for the rest of the time it would be good for you to be getting points of confusion cleared up.


  1. I had a question about one of the slides on transfer pricing.
    The slide talked about examples from campus and if they are considered transfer pricing or not. I was wondering if you could elaborate and explain why each is or is not a transfer pricing example.
    They are:
    Meal Plan
    Parking Permit
    RCM formulas

  2. The question is whether this a market price, with the buyer or seller outside the organization, or is it an internal to the institution price.

    So with that in mind, I think we said,

    Tuition - probably best thought of as a market price with students and their families as customers.

    Textbooks - the price is paid to the publisher. So that is a market price.

    Meal Plan - This is only available to students who have enrolled and we learned it is actually pricier than commercial alternatives, though probably a lot more convenient. This is a transfer price.

    Parking Permit - Again only available to people who are affiliated with the university, so a transfer price.

    RCM Formulas - this is the only true transfer price in that is payments between divisions for services rendered by the division. Incidentally, I found out that the payment formula for teaching a student and the one for having the student major in the department is independent of whether the student pays in state tuition or out of state tuition. The difference in those two rates is kept by the Provost's Office for costs incurred centrally.