CIMA Exam CIMAPRO19-P02-1 Topic 4 Question 108 Discussion

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

Question #: 108
Topic #: 4

[All CIMAPRO19-P02-1 Questions]

If transfer prices are set at variable costs, the supplying division does not cover its fixed costs.

Which of the following does NOT resolve this problem?

AEach division can be given a share of the overall contribution earned by the organization.

BA system of dual pricing can be adopted.

CReduce the level of fixed costs.

DCentral management can impose a range within which the transfer price should fall.

Show Suggested Answer

Suggested Answer: C

by Lilli at Mar 07, 2025, 03:00 AM

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Brianne

6 days ago

Option B seems like a fair solution. Adopting a dual pricing system could help balance the interests of both divisions.

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Glory

7 days ago

Haha, good one! Reducing fixed costs? That's like asking a hungry person to just eat less. Classic!

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Aretha

11 days ago

Option C is the correct answer. Reducing the level of fixed costs is the only solution that doesn't resolve the problem of the supplying division not covering its fixed costs.

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Willodean

16 days ago

I agree, the supplying division needs to cover its fixed costs too.

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Miriam

17 days ago

I think setting transfer prices at variable costs is not ideal.

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