Transfer pricing is the price for sales between entities that are related to one another, such as different departments of the same company, or between a parent company and its subsidiary. Although these bodies may be related, they transact at arm's length, so transfer prices rarely stray very far from market prices. As with market pricing, transfer prices can be determined through a variety of methods, including cost-based or profit-seeking pricing models. Variable cost transfer pricing refers to a price where the purchaser pays the variable costs of production, without a markup.