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Transfer Price

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Transfer Price

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • October 23, 2021 at 12:06 pm #638893
    Syed Ahsan Ali
    Participant
    • Topics: 111
    • Replies: 69
    • ☆☆

    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 cost

    Please 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-in

    October 23, 2021 at 4:48 pm #638918
    John Moffat
    Keymaster
    • Topics: 56
    • Replies: 51582
    • ☆☆☆☆☆

    That 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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