CIMA Exam CIMAPRO19-P02-1 Topic 3 Question 104 Discussion

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

Question #: 104
Topic #: 3

An organization is comprised of two divisions. One of the divisions manufactures a product that it sells both to an imperfect external market and to the other division.

The organization wishes to establish the most suitable basis for the transfer price for this product and is considering either a negotiated transfer price or a market-based transfer price.

Which of the following statements is correct?

AA negotiated transfer price could help to overcome the problem of establishing a single price for this external market.

BA single market price for all of the division's output can be determined easily whereas a negotiated transfer price may result in protracted negotiations.

CA negotiated transfer price will always result in goal congruence whereas this is not always true when using a single market-based transfer price.

DA market-based transfer price will ensure both divisional autonomy and goal congruence because part of the division's output is sold to the external market.

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Suggested Answer: A, C, D

by Hyman at Dec 05, 2024, 05:22 AM

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Elbert

27 days ago

A market-based transfer price seems like the way to go. It will ensure both divisional autonomy and goal congruence. Plus, it's way easier than trying to negotiate a price that makes everyone happy. Negotiating is like herding cats - good luck with that!

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Cassi

7 days ago

Negotiating is like herding cats - good luck with that!

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Joesph

15 days ago

A market-based transfer price will ensure both divisional autonomy and goal congruence because part of the division's output is sold to the external market.

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Callie

1 months ago

A negotiated transfer price will always result in goal congruence? I don't think so. It really depends on how the negotiations are structured and the incentives in place for each division.

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Micah

2 months ago

I disagree. A single market price for all of the division's output can be determined easily, and a negotiated transfer price may result in protracted negotiations and conflicts between the divisions.

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Rory

29 days ago

B) A single market price for all of the division's output can be determined easily whereas a negotiated transfer price may result in protracted negotiations.

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Mila

1 months ago

A) A negotiated transfer price could help to overcome the problem of establishing a single price for this external market.

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Ronald

2 months ago

That's true, but a negotiated transfer price could also lead to better goal congruence between the divisions.

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Kristofer

2 months ago

A negotiated transfer price could help overcome the problem of establishing a single price for the external market. This would allow for more flexibility in pricing based on the specific needs of each division.

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Goldie

1 months ago

D) A market-based transfer price will ensure both divisional autonomy and goal congruence because part of the division's output is sold to the external market.

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Brittani

1 months ago

C) A negotiated transfer price will always result in goal congruence whereas this is not always true when using a single market-based transfer price.

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Rebecka

1 months ago

B) A single market price for all of the division's output can be determined easily whereas a negotiated transfer price may result in protracted negotiations.

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