Skip to content

Ask the Tutor ACCA APM

Transfer pricing - Unlimited capacity

ABAkka Bakka6y ago
Hi Tutor, Please help me in understanding, what happens when there is unlimited capacity and no external market? Thank you.
kengarrettkengarrettTutor6y ago#1
Nothing special happens. If there is no external market, all production has to go from the producing division to the selling division. The transfer price has to be in a range that allows both divisions to make a profit.... or at least not to incur a negative contribution.....so that both parties want to play ball. Chapter 14 of our notes and lectures gives a full run-down of the issues.
Sign into reply to this topic.