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In Q 69.4 bpp revision kit dec2014-june2015 how is the maximum transfer price set 25$ ?? Isn’t it lower of external market price and NMR ?
It is a poorly worded question from BPP.
The ‘market price in the external market’ is meant to be the price that Division A can sell it at (not the price that Division B can buy it for).
The question does not make that clear (although it does refer later to external market demand which I suppose is a clue!).
In the question 72.8 the center manager is considering to sell machine and that machine would add 2500 to divisional profit next year , when we are preparing the ROI for next year why is the profit of 2500 being deducted instead of increasing profit ?
The question says that the machine they are considering selling is already included in the forecasts.
So if they sell the machine and buy the new one, then the forecast profit will fall by the 2500 because of the one being sold, and increase by 5200 due to the new one being bought.
(When it is a new topic, please start a new thread. This has nothing to do with transfer pricing 🙂 )
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