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PM Chapter 18 Questions Transfer Pricing

 

Reader Interactions

Comments

  1. davidvdo says

    November 24, 2022 at 10:09 am

    Hello sir,

    Are there any workings for question 4?

    Kind regards

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    • John Moffat says

      November 24, 2022 at 3:39 pm

      A has unlimited production capacity and therefore the minimum TP is the marginal cost of $30.

      B has net marginal revenue of 70 – 20 = 50, and therefore that is the maximum TP.

      Have you watched the free lectures on this?

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  2. kvz911 says

    September 10, 2022 at 2:26 pm

    Sir In Question No 3,

    We are giving up the Contribution of X ($4 per hour + 100 SP) because the business needs Y. So we only Produce Y & stop producing X??

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  3. trenevskasara says

    August 22, 2021 at 4:58 pm

    In question 3, I didn’t quite understand why the marginal cost is 100 and not 80?

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    • cherry-pop says

      November 24, 2021 at 10:52 pm

      As you are looking to transfer product Y to another department, therefore you would use the marginal cost of product Y, not X.

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      • kvz911 says

        September 10, 2022 at 2:49 pm

        So Y is being transferred to the other division, That’s why the Minimum Price should be > 100 & the Greater contribution lost is $4 per hour so $40( 10×4) becomes our opportunity cost !! Thanks man !! Clear now !!

  4. weirdxnii says

    May 21, 2021 at 5:15 am

    In question 2, why is the buying cost of $350 must be subtracted with marginal cost of $240?

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    • John Moffat says

      May 21, 2021 at 9:16 am

      Because if Q buys from outside they will pay 350 and P will no longer be making it which will save costs of 240. So it will be costing the company an extra 110.

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