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december 2012 q no 5 wash co

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › december 2012 q no 5 wash co

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • August 30, 2018 at 3:09 pm #470180
    lachu910
    Member
    • Topics: 28
    • Replies: 38
    • ☆☆

    Here the examiner says “The retail division’s manager is convinced that, if he could obtain R at a lower cost and therefore reduce the external selling price from $260 to $230 per unit, he could significantly increase sales of R, which would be beneficial to both
    divisions”
    my question is Part c where u are asked to calculate profiys of bth divisions using transfer price of ABC method. Under abc method product R is costing less ie 187$. so i assume that the prodcution manger will reduce the selling price to 230p.u. however he has still used 260. can u tell me y he would use the old transfer price. the wordings are quite confusing coz yu tend to think the selling price will now change.

    August 31, 2018 at 5:23 am #470262
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54704
    • ☆☆☆☆☆

    It is because the question asks to calculate last months profits if ABC had been used.

    The transfer price may be changed in the future, but last months transfer price was already established.

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