WorksheetsPM - Relevant Costing & Transfer Pricing
Total questions: 14
Worksheet time: 10mins
Which Of the following statements is true Of pricing?
Discrimination is always illegal so everyone should pay the same amount
Early adopters get a discount for being first in the market
Pricing against a similar competitor is important in the Internet age
Price to make the most sales in that way you will always get the most profit
Which Of the following conditions would need to be true for a price skimming strategy to
be effective?
An existing product where the owners have decided to increase prices to move the
product up market
Where the product has a long life-cycle
Where the product has a Short life-cycle
Where only modest development costs had been incurred
Which of the following conditions must be true for a price discrimination strategy to be
effective?
Buying power Of customers must be similar in both market segments
Goods must not be able to move freely between market segments
Goods must be able to move freely market segments
The demand curves in each market must be the same
A product has a prime cost Of $12, variable overheads Of $3 per unit and fixed overheads Of
$6 per unit.
Which pricing policy gives the highest price?
Prime cost + 80%
Marginal cost +
Total absorption cost + 20%
Net margin Of 14% on selling price
The demand for a product is units when the price is $400 and units when price
is $380, The variable cost Of the product is The variable cost Of the product is $200.
What is the optimum price to charged in order to maximise profit?
$150
$200
$350
$700
The following price and demand combinations have been given:
Pl = $400, QI = 5,000 units
P2 = $380, Q2 = 5,500 units
The variable cost is a constant at $80 per unit and fixed costs are $60000 per annum-
What is the demand function?
P = 200—0.04Q
P = 600-0.04Q
P -600 0.04Q
P = 200 -20Q
The following price and demand combinations have been given:
Pl = $4U QI = 5,000 units
P2 = $380, Q2 = units
The variable cost is a constant at $80 per unit and fixed costs are per annum.
The optimal price is (to the nearest S):
(a)
Appler is considering the relevant cash flows involved in a short-term decision,
important client has asked for the minimum price for the processing of a compound.
compound involves the following:
An
The
Material A: Appler needs kg of material for the compound but has kg in stock at
present. The stock items were bought 3 months ago for S5/kg but have suffered 10%
shrinkage since that date, Material A is not regularly used in the business and would have
to be disposed of at a cost to Appler of $400 in total. The current purchase price of material
A is $6.25/kg.
Material B: Appler needs 800 kg Of material B and has this in stock as it is regularly needed.
The stock was bought 2 months ago for S4/kg although it can be bought now at $3,75/kg
due to its seasonal nature.
Processing energy costs would be and the supervisor says they would allocate $150 of
their weekly salary to the job in the company's job costing system.
Based upon the scenario information, what is the total cost of material A and B to be built
in to the minimum price calculation (to the nearest S)?
(a)
Appler is considering the relevant cash flows involved in a short-term decision. An
important client has asked for the minimum price for the processing of a compound. The
compound involves the following:
Material A: Appler needs 5(X) kg Of material for the compound but has 200 kg in Stock at
present. The stock items were bought 3 months ago for S5/kg but have suffered 10%
shrinkage since that date. Material A is not regularly used in the business and would have
to be disposed of at a cost to Appler of $400 in total. The current purchase price of
material A is $6.25/kg.
Material B: Appler needs 800 kg Of material B and has this in Stock as it is regularly needed.
The stock was 2 months ago for $4/kg although it can bought now at $3.75/kg
due to its seasonal nature.
Processing energy costs would be $200 and the supervisor says they would allocate $150 of
their weekly salary to the job in the company's job costing system.
Based upon the scenario information, what is the total cost for processing and
supervision to be included in the minimum price calculation (to the nearest S)?
(a)
What is the maximum price per component, at which buying is preferable to internal
manufacture?
$8.00
$10.50
$12.50
$15.50
Oxco has two divisions, A and B. Division A makes a component for air conditioning units
which it can only sell to Division B. It has no other outlet for sales.
Current information relating to Division A is as follows:
Marginal cost unit $100
Transfer price of the component $165
Total production and sales of the component each year 2,200 units
Specific fixed costs of Division A per year $10,000
Cold Co has offered to sell the component to Division B for $140 per unit. If Division B
accepts this offer, Division A will be shut down.
If Division B accepts Cold CO's offer, what will be the impact on profits per year for the
group as a whole?
Increase of $65,000
Decrease of $78,000
Decrease of
Increase of $55,cm
JB Ltd is a divisionalised organisation comprising a number of divisions, including divisions A
and B. Division A makes a single product, which it sells on the external market at a price Of
$12 per unit. The variable cost Of the product is $8 per unit and the fixed cost is $3 per unit.
Market demand for the product considerably exceeds Division A's maximum production
capacity Of units per month.
Division B would like to obtain units Of the product from Division A, If Division A does
transfer some Of its production internally rather than sell externally, then the saving in
packaging COStS would be $1.50 per unit,
What transfer price per unit should Division A quote in order to maximise group profit?
(a)
Perrin co has two divisions, A and B.
Division A has limited skilled labour and is operating at full capacity making product Y. It has
been asked to supply a different product, X, to division B. Division B currently sources this
product externally for $700 per unit.
The same grade of materials and labour is used in both products. The cost cards for each
product are shown below:
Product Y X
(S)/unit ($)/unit
Selling price 600 -
Direct materials ($50 per kg) 200 150
Direct labour ($20 per hour) 80 120
Apportioned fixed overheads ($15 per hour) 60 90
Using an opportunity cost approach to transfer pricing, what is the minimum transfer
price?
$270
$750
$590
$840
TM plc makes components which it sells internally to its subsidiary RM Ltd, as well as to its
own external market.
The external market price is $24.00 per unit, which yields a contribution Of 40% Of sales. For
external sales, variable COStS include $1.50 per unit for distribution costs, which are not
incurred on internal sales.
TM plc has sufficient capacity to meet all of the internal and external sales. The objective is
to maximise group profit.
At what unit price should the component be transferred to RM Ltd (to 2 decimal places)?
(a)
