- This topic has 1 reply, 2 voices, and was last updated 6 years ago by .
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
- The topic ‘transfer pricing’ is closed to new replies.
OpenTuition recommends the new interactive BPP books for June 2024 exams, Get your discount code >>
Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › transfer pricing
Cherry Co has two independent divisions, A and B. Division A produces product X. B is a new division which produces product Y. It requires units of product X to produce product Y.
The following two statements have been made about Cherry Co.
(1) Cherry Co’s transfer pricing system should seek to establish a transfer price for X that will provide an incentive for the managers of A and B to make and sell quantities of products that will maximise sales
of Product Y.
(2) The manager of division B is likely to be more motivated if she is given freedom in which to operate and is able to purchase from outside suppliers if prices are cheaper.
1. Could you explain how statement one is not correct?
The objective should be to maximise the overall profit of the business – not to maximise sales of just one product.