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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › resale price method
Hi Sir,
Can you please briefly explain RPM with example .
I googled it and end up with this paragraph:
”
the resale price method (“RPM”) evaluates whether the amount charged in a controlled transaction is at arm’s length, by reference to the gross margin realized in comparable uncontrolled transactions. Under this method, the arm’s length price is measured by subtracting an appropriate gross profit from the applicable resale price of the property involved in the controlled transaction. The resale price method is most often used for distributors that resell products without physically altering them or adding substantial value to them.”
Thank you in advance
It simply means that in order to determine what a fair profit is then we would look at a similar business, see what gross profit they were making, and apply this to the sales price in our company.
(Although I am not sure it is likely to be so relevant for P4)