CIMA Exam CIMAPRO19-P02-1 Topic 4 Question 45 Discussion

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

Question #: 45
Topic #: 4

A group consists of two divisions, Alpha and Beta, both of which are profit centers. Alpha sells a product to the external market and also sells it as an intermediate product to Beta.

Beta then processes further before selling the final product to the external market. The current group transfer pricing policy requires Alpha to charge Beta with the variable cost of production.

Which of the following statements is valid?

AA two-part tariff would provide a more effective basis for assessing divisional performance.

BA dual pricing approach to transfer pricing would increase Beta's total profit and reduce Alpha's.

CIf Alpha has unfulfilled external demand then the transfer price should always be set at variable cost.

DTransfer prices only affect the assessment of performance of investment centres, not of profit centres.

Show Suggested Answer

Suggested Answer: A

by Brandon at May 04, 2022, 08:50 AM

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