Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Transfer Price
- This topic has 1 reply, 2 voices, and was last updated 2 years ago by John Moffat.
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- October 23, 2021 at 12:06 pm #638893
I have few questions to ask related to Transfer Pricing:
1. Selling divison (A) will be always the one which set the minimum transfer price which it is prepared to sell to buying division (B)?
2. Minimum Transfer Price is calculated:
If Selling division has unlimited production capacity = Variable cost
If Selling division has limited production capacity = Variable cost + Opportunity costPlease correct me that ‘Marginal cost is actually Variable cost of making the product’?
3. Opportunity cost arises only in the case of selling division (A) because it is the only division which will be losing income from another source?
4. Buying division (B) will always be the one which set the maximum transfer price which it is prepared to pay to selling division (A)?
5. Maximum Transfer Price is calculated:
Lower of:
a) Net Marginal Revenue i.e. (External Selling Price – Variable cost)
b) External Buy-inOctober 23, 2021 at 4:48 pm #638918That is all correct and the marginal cost is the variable cost.
Are you actually watching my free lectures, because everything you have typed out is explained in my lectures? 🙂
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