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TRANSFER PRICE

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › TRANSFER PRICE

  • This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 21, 2021 at 3:43 pm #621348
    Shi2004
    Participant
    • Topics: 79
    • Replies: 33
    • ☆☆

    In a company with a divisionalised structure, Div A transfers its output to divB. DivA produce just 1 item component X. Div B makes and sell an end product that requires one unit of component X.
    Marginal cost of production in div A $8
    Fixed overhead cost of production $3
    Cost of selling in external market $1
    Market price in external market $16
    Div B contribution from further processing component X, before deducting transfer cost $25
    Div A is working at full capacity.
    What is the min price per unit of component X in this situation?
    How to find the contribution lost??

    May 22, 2021 at 7:42 am #621381
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54711
    • ☆☆☆☆☆

    The selling price in the external market is $16.
    The marginal cost of selling in the external market is 8 + 1 = $9.

    Therefore the lost contribution is 16 – 9 = $7 per unit.

    May 22, 2021 at 4:30 pm #621458
    Shi2004
    Participant
    • Topics: 79
    • Replies: 33
    • ☆☆

    Thank you sir!!! 🙂

    May 23, 2021 at 10:25 am #621501
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54711
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘TRANSFER PRICE’ is closed to new replies.

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