ACCA PM · Chapter 14 · Question 9 of 10
Under a two-part tariff transfer pricing system, how are transfers charged?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) At marginal cost per unit, plus a fixed fee each period to cover the supplying division's fixed costs and a profit
Explanation
A two-part tariff charges units at marginal cost, so the receiving division makes decisions using the true incremental cost, plus a fixed periodic fee so the supplier recovers fixed costs and earns a profit. Recording different prices for each division describes dual pricing.
More Divisional performance and transfer pricing MCQs
- Q1Division D has capital employed of $4,000,000 and controllable profit of $640,000. The company's cost of capital is 12%. What is the…
- Q2Division D has capital employed of $4,000,000 and controllable profit of $640,000. The company's cost of capital is 12%. What is the…
- Q3Division D has capital employed of $4,000,000 and controllable profit of $640,000. The company's cost of capital is 12%. The divisional…
- Q4Which of the following is a disadvantage of residual income compared with return on investment as a divisional performance measure?
- Q5A division's assets are measured at net book value. If profits remain constant and no new assets are acquired, what will happen to the…