CIMAPRO19-P02-1 Exam - Topic 1 Question 17 Discussion

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

Question #: 17
Topic #: 1

It is often claimed that a two-part transfer pricing system offers a number of advantages to organizations which use it.

Which of the following statements is NOT an advantage of using a two-part transfer pricing system?

ATransfers are made at the marginal cost of the supplying division and both divisions should be able to report profits from inter-divisional trading.

BThe receiving division is made aware of and charged for the full cost of obtaining intermediate products from other divisions.

CIt stimulates planning, communication and coordination amongst divisions.

DThe agreed fixed fee simply compensates the supplying division for incurring the fixed costs associated with the item transferred.

Show Suggested Answer

Suggested Answer: D

by Quentin at May 07, 2022, 07:36 PM

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Caitlin

7 months ago

Option A sounds like a solid benefit for both divisions!

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Twanna

7 months ago

Wait, are we sure about that? Seems like a stretch.

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Caitlin

7 months ago

Totally agree, option D just covers fixed costs.

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Lamar

8 months ago

I think option D is not really an advantage.

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Brandon

8 months ago

A two-part system can help align divisional goals.

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Marguerita

8 months ago

Hmm, I'm a bit confused by the different entries and how they apply to the two clients. I'll need to work through this step-by-step to make sure I understand the correct outcome.

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Frankie

8 months ago

I'm a little confused by the terminology here. I'll need to review my notes on the AAIs and the different account types to make sure I select the correct answer.

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Rikki

8 months ago

I think the number could be closer to 20, especially with all the combinations of credit scores and income levels. Each category should affect the interest rates uniquely.

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