Chapter 18 transfer pricing

F5 Performance management practice questions ACCA F5 Performance management practice questions ACCA F5 Performance management practice questions ACCA

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Transfer Pricing

Prepared for Educational Purposes

August 18, 2025

Contents

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1 Part 1: List of Questions

This section contains 50 multiple-choice questions based on Transfer Pricing, focusing on minimum and maximum transfer prices, goal congruence, and proﬁt impacts Numbers are left-aligned from 1 to 50

1 A company has two divisions Division A manufactures the product and transfers them to Division B which sells the product There is an external market in which A can sell the product and an external market in which B can buy the product Which

of the following states the rule for determining the minimum transfer price?

a The lower of the net marginal revenue to B and the external purchase price

b The marginal cost to A, plus any lost contribution to A

c The higher of the net marginal revenue to B and the external purchase price

d The marginal cost to A, less any lost contribution to A

2 Epsilon has two divisions, P and Q Division P makes a component which it can only sell to Division Q Current information for Division P is as follows: Marginal cost per unit: $240, Transfer price of the component: $396, Total production and sales per year: 4,000 units, Specific fixed costs of Division P: $24,000 per year Alpha Co has offered to sell the component to Division Q for $350 per unit If Division Q accepts this offer, Division P will be closed If Division Q accepts Alpha Cos offer, what will

be the impact on proﬁts per year for the group as a whole?

a Increase of $160,000

b Decrease of $416,000

c Decrease of $440,000

d Increase of $184,000

3 A division of a company is capable of making two products - X and Y They can sell both products externally as follows: X: External selling price $100, Variable cost

$80, Contribution per unit $20, Labour hours per unit 5; Y: External selling price

$130, Variable cost $100, Contribution per unit $30, Labour hours per unit 10 The company has limited labour hours available, and the other division requires product

Y What is the minimum transfer price that should be charged by the division in order to achieve goal congruence?

a $130

b $140

c $100

d $110

4 Division A has costs of $30 per unit, and transfers goods to Division B which has additional costs of $20 per unit Division B sells externally at $70 per unit Division

A can sell part-ﬁnished units externally for $40 per unit There is limited demand externally from A, and A has unlimited production capacity What are the minimum and maximum transfer prices in order to achieve goal congruent decisions?

a Minimum $40; Maximum $50

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b Minimum $30; Maximum $50

c Minimum $30; Maximum $70

d Minimum $40; Maximum $70

5 Division A has costs of $30 per unit, and transfers goods to Division B which has additional costs of $20 per unit Division B sells externally at $70 per unit Division

A can sell part-ﬁnished units externally for $40 per unit There is unlimited demand externally from A, and A has limited production capacity What are the minimum and maximum transfer prices in order to achieve goal congruent decisions?

6 Division X transfers goods to Division Y Division Xs variable cost is $50 per unit, and it can sell externally for $80 Division Y has additional costs of $30 per unit and sells externally for $120 What is the minimum transfer price if X has limited capacity and unlimited external demand?

a $50

b $80

c $90

d $120

7 Division A produces a product with a variable cost of $25 per unit and can sell it externally for $45 Division B adds $15 in costs and sells externally for $70 If Division

A has unlimited capacity and limited external demand, what is the minimum transfer price?

a $25

b $45

c $55

d $70

8 A company has two divisions, P and Q Division P produces a component with a marginal cost of $100 per unit and ﬁxed costs of $10,000 per year It transfers 2,000 units to Division Q at $150 per unit An external supplier oﬀers the component for

$120 per unit, and P would close if Q buys externally What is the proﬁt impact on the group?

9 Division M produces a product with a variable cost of $60 per unit and can sell externally for $100 Division N adds $20 in costs and sells externally for $150 If M

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has limited capacity and unlimited external demand, what is the maximum transfer price?

a $100

b $130

c $150

d $80

10 Which of the following is a key objective of transfer pricing?

a Maximize divisional costs

b Achieve goal congruence

c Minimize group proﬁts

d Ignore external market prices

11 Division A produces a component with a variable cost of $20 and can sell externally for $50 Division B adds $10 in costs and sells for $80 If A has unlimited capacity and limited external demand, what are the minimum and maximum transfer prices?

12 A division produces two products: Product X (selling price $200, variable cost $150, 4 labour hours) and Product Y (selling price $300, variable cost $220, 8 labour hours) Limited labour hours are available, and another division requires Product Y What is the minimum transfer price for Product Y?

a $220

b $260

c $270

d $300

13 Division P transfers goods to Division Q Ps variable cost is $40 per unit, and it can sell externally for $60 Q adds $25 in costs and sells for $100 If P has limited capacity and unlimited external demand, what is the minimum transfer price?

a $40

b $60

c $65

d $100

14 Which of the following factors should be considered in setting a transfer price?

a Only Division As costs

b Only Division Bs selling price

c External market prices and divisional costs

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d Only ﬁxed costs of the group

15 Division X produces a component with a variable cost of $15 and ﬁxed costs of $5,000 per year It transfers 1,000 units to Division Y at $25 per unit An external supplier oﬀers the component for $20 per unit, and X would close if Y buys externally What

is the proﬁt impact on the group?

16 Division A produces a product with a variable cost of $50 and can sell externally for

$90 Division B adds $30 in costs and sells for $140 If A has unlimited capacity and limited external demand, what is the maximum transfer price?

a $90

b $110

c $140

d $50

17 A division produces two products: Product A (selling price $120, variable cost $80, 3 labour hours) and Product B (selling price $180, variable cost $120, 6 labour hours) Limited labour hours are available, and another division requires Product B What is the minimum transfer price for Product B?

a $120

b $140

c $160

d $180

18 Division M transfers goods to Division N Ms variable cost is $70 per unit, and it can sell externally for $110 N adds $40 in costs and sells for $160 If M has limited ca-pacity and unlimited external demand, what are the minimum and maximum transfer prices?

19 Which of the following is a disadvantage of market-based transfer pricing?

a It ignores divisional costs

b It may not reﬂect true market conditions

c It always maximizes group proﬁts

d It is diﬃcult to calculate

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20 Division P produces a component with a variable cost of $200 and ﬁxed costs of

$50,000 per year It transfers 5,000 units to Division Q at $300 per unit An external supplier oﬀers the component for $250 per unit, and P would close if Q buys externally What is the proﬁt impact on the group?

$100 Division B adds $20 in costs and sells for $150 If A has unlimited capacity and limited external demand, what is the minimum transfer price?

a $60

b $100

c $130

d $150

a $140

b $165

c $175

d $200

23 Division X transfers goods to Division Y Xs variable cost is $45 per unit, and it can sell externally for $75 Y adds $25 in costs and sells for $120 If X has unlimited capacity and limited external demand, what are the minimum and maximum transfer prices?

24 Which of the following is an advantage of cost-based transfer pricing?

a It ensures market competitiveness

b It is simple to calculate

c It maximizes group proﬁts

d It ignores divisional costs

25 Division P produces a component with a variable cost of $80 and ﬁxed costs of $20,000 per year It transfers 2,000 units to Division Q at $120 per unit An external supplier

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oﬀers the component for $100 per unit, and P would close if Q buys externally What

$60 Division B adds $15 in costs and sells for $90 If A has limited capacity and unlimited external demand, what is the minimum transfer price?

a $35

b $60

c $75

d $90

a $100

b $115

c $130

d $160

28 Division M transfers goods to Division N Ms variable cost is $90 per unit, and it can sell externally for $130 N adds $30 in costs and sells for $180 If M has limited capacity and unlimited external demand, what is the maximum transfer price?

a $130

b $150

c $180

d $90

29 Which of the following statements about transfer pricing is true?

a It should ignore external market prices

b It aims to achieve divisional autonomy and group goals

c It always uses ﬁxed costs

d It is only relevant for non-proﬁt organizations

30 Division X produces a component with a variable cost of $50 and ﬁxed costs of $15,000 per year It transfers 3,000 units to Division Y at $80 per unit An external supplier oﬀers the component for $70 per unit, and X would close if Y buys externally What

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$110 Division B adds $25 in costs and sells for $160 If A has unlimited capacity and limited external demand, what are the minimum and maximum transfer prices?

a $160

b $180

c $200

d $250

33 Division P transfers goods to Division Q Ps variable cost is $55 per unit, and it can sell externally for $85 Q adds $20 in costs and sells for $120 If P has limited capacity and unlimited external demand, what are the minimum and maximum transfer prices?

34 Which of the following is a goal of transfer pricing?

a Maximize divisional losses

b Ensure fair performance evaluation

c Ignore divisional costs

d Focus only on external sales

35 Division M produces a component with a variable cost of $120 and ﬁxed costs of

$30,000 per year It transfers 4,000 units to Division N at $180 per unit An external supplier oﬀers the component for $150 per unit, and M would close if N buys externally What is the proﬁt impact on the group?

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$70 Division B adds $20 in costs and sells for $110 If A has limited capacity and unlimited external demand, what is the minimum transfer price?

a $40

b $70

c $90

d $110

a $130

b $150

c $170

d $200

38 Division X transfers goods to Division Y Xs variable cost is $65 per unit, and it can sell externally for $100 Y adds $30 in costs and sells for $150 If X has unlimited capacity and limited external demand, what is the maximum transfer price?

a $100

b $120

c $150

d $65

39 Which of the following is a beneﬁt of market-based transfer pricing?

a It ignores divisional performance

b It reﬂects external competitive conditions

c It complicates proﬁt calculations

d It always minimizes group proﬁts

40 Division P produces a component with a variable cost of $90 and ﬁxed costs of $25,000 per year It transfers 5,000 units to Division Q at $130 per unit An external supplier oﬀers the component for $110 per unit, and P would close if Q buys externally What

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$80 Division B adds $25 in costs and sells for $120 If A has limited capacity and unlimited external demand, what are the minimum and maximum transfer prices?

a $140

b $164

c $180

d $220

43 Division M transfers goods to Division N Ms variable cost is $75 per unit, and it can sell externally for $110 N adds $35 in costs and sells for $160 If M has unlimited capacity and limited external demand, what are the minimum and maximum transfer prices?

44 Which of the following statements about transfer pricing is true?

a It should only consider ﬁxed costs

b It should balance divisional and group objectives

c It always uses external market prices

d It is irrelevant for performance evaluation

45 Division X produces a component with a variable cost of $100 and ﬁxed costs of

$40,000 per year It transfers 2,000 units to Division Y at $160 per unit An external supplier oﬀers the component for $140 per unit, and X would close if Y buys externally What is the proﬁt impact on the group?

Tiêu đề	Chapter 18 transfer pricing
Thể loại	Test
Năm xuất bản	2025

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