CIMA Exam CIMAPRO19-P02-1 Topic 7 Question 31 Discussion

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

Question #: 31
Topic #: 7

GHY has two subsidiaries. GHY-Motor manufactures car engines and GHY-Build designs and assembles cars. In the car industry it is common for manufacturers to buy parts, including engines, from other manufacturers.

GHY has granted GHY-Motor and GHY-Build full autonomy. GHY-Build is considering using an engine from another company for a new model that it is designing. GYY-Motor has a suitable engine, but it charges more than GHY-Build's preferred supplier.

Which of the following statements is correct? Select ALL that apply.

AGHY should consider permitting GHY-Motor to charge part of the selling price on engines sold to GHY-Build to head office.

BForcing GHY-Motor to grant a discount to GHY-Build could lead to dysfunctional behavior.

CThere could be significant non-financial issues associated with GHY-Build's decision to buy another engine.

DParent companies should never grant subsidiaries full autonomy on matters such as intra-group sales.

EThe threat of dysfunctional behavior is largely theoretical and managers can be trusted to maximise shareholder wealth.

Show Suggested Answer

Suggested Answer: A, B, C

by Willodean at May 03, 2022, 08:44 PM

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