The following question is from an examiner report
Conference Co has a divisionalised structure. One of its divisions, Division X, sells all its output to other divisions within the company.
Division X's annual budgeted output and costs are as follows:
Units sold 1,050
Direct materials $22,500
Direct labour $45,350
Overheads (40% variable) $37,150
What transfer price per unit will result in a profit margin of 20% for Division X (to the nearest
whole $)?
The examiner has used the full COP to then calculate the transfer price. So the and he provided is 125
I thought the selling division sets the minimum transfer price which is the marginal cost in this case. why has the examiner included fixed costs Sir?
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transfer pricing
3y ago#1The question is not asking for the minimum transfer price.
It is asking what TP will give a profit margin of 20% to Division X. Profit is after all costs including fixed costs.
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