CIMA Exam CIMAPRO19-P02-1 Topic 3 Question 99 Discussion

Actual exam question for CIMA's CIMAPRO19-P02-1 exam

Question #: 99
Topic #: 3

An organization has a decentralized structure in which division A supplies division B with an intermediate product for which there is no external market. Division B carries out further processing and then sells the final product on the external market. Due to organizational policy the current transfer pricing basis is variable cost.

The manager of division A has stated, "The current transfer price is unfair because it does not enable us to recoup our costs".

The manager of division B has stated, "The current transfer pricing system enables us to quote competitive prices for the finished product".

The Chief Executive of the organization is considering imposing a transfer pricing policy that uses dual pricing.

Dual pricing would:

Abe welcomed by the manager of division A but the manager of division B would resist it.

Bbe welcomed by both divisional managers.

Cincrease divisional autonomy.

Dinvolve a lump sum payment to division A in addition to the payment of the variable cost per unit.

Show Suggested Answer

Suggested Answer: C

by Lashaunda at Sep 19, 2024, 03:58 AM

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Carlee

10 days ago

I agree with Peggie. Division A should be able to recoup their costs.

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Peggie

11 days ago

I think dual pricing would be fair for both divisions.

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