Two-part transfer price
A two-part transfer price separates a per-unit charge from a fixed periodic payment between divisions. The unit charge can reflect incremental resource cost to support sensible purchasing decisions, while the fixed payment contributes towards capacity costs and the supplying division’s return. Its design must consider capacity commitment, demand uncertainty, responsibility and fair performance assessment. Because the payment is internal, it changes divisional results without itself creating external revenue or additional group profit.
Worked example
A supplier charges $8 per transferred unit plus a $12,000 quarterly capacity fee. At 5,000 units, the buyer’s total internal charge is $40,000 + $12,000 = $52,000, equivalent to $10.40 per unit at that volume. Another unit still adds $8 while the fixed fee is unchanged.
Common mistake
Using the average $10.40 charge as the marginal cost of another unit, or forgetting the fixed payment in divisional assessment.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | PM | Supporting | September 2026–June 2027 |