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Dear John,
How are you?
I hope you are doing well,
First of all I would like to thank you for your informative and helpful lectures but, I have three questions as per transfer pricing you said in your lecture that we suppose that we produce many products so, the first question is,
1- in regards to cost plus transfer pricing the cost of transfer its full cost I mean it contains both fixed and variable costs only ?
2nd question is,
2- also sir, you have said that we have just variable costs for example 3, 4,5,6 and 7 Hence we have report CM instead of profit am are right or wrong if wrong please could you explain why?
Thank you so much in advance.1. It depends whether they decide on absorption cost plus or marginal cost plus – just as in the earlier lectures on ‘normal’ pricing.
2 I am guessing that by CM you mean the contribution (CM is not a standard acronym and you must not use it in the exam). If so, then you are correct.
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