![stat transfer cost stat transfer cost](https://stattransfer.com/wp-content/uploads/2019/09/lisrel.png)
Let’s also assume they charge a mark up of £200 per unit. Let’s say each of those diesel engines made at Ford’s engine plant above, cost £500 to manufacture. the minimum they would normally charge an external customer).
#Stat transfer cost plus#
The division providing the goods/services internally often has the opportunity to sell these same goods externally instead and so the minimum they will be willing to charge another division is cost plus their profit margin (i.e.
![stat transfer cost stat transfer cost](https://i.pinimg.com/originals/0f/cc/25/0fcc2564ce1f2d023891f95031f9b457.jpg)
Let’s have a look at some of them… Usually, the transfer price will be set between two limits Well, as with most management accounting techniques, there’s more than one method. Okay, so that’s the rationale, but how do we calculate a transfer price?
![stat transfer cost stat transfer cost](https://www.pwc.com/ua/en/services/tax/assets/transfer-pricing-stat.png)
Their engine plant in South Africa supplies the Duratorq TDCi diesel engines to the group’s global assembly plants which make the Ford Ranger pick-up trucks Having done some research on the internet, an example of this situation playing out in the real world is at the Ford Motor Company. The value used is known as the transfer price. This value needs to be an amount that benefits the company as a whole but also doesn’t disadvantage each division involved, as this would reflect badly on them when it comes to assessing divisional performance. When goods or services are transferred between different divisions within an organisation, there needs to be a value put on this transaction so that it can be recorded in the company’s accounts. Okay, so let’s explore what I found out… Overview In this case it was the Astranti CIMA P3 Study Text. So as with anything on the new CIMA syllabus that I want to learn for the first time or get a refresher on, I turned to my favoured study materials for a clear and easy to follow explanation of everything I need to know. There are lots of other explanations on this topic elsewhere on the web but people seem to resonate with the way I teach.Īs a heads up before I start, transfer pricing is not something I’ve looked at for a number of years. My aim in this post is to give you a genuine understanding of transfer pricing, and particularly the calculations involved. I was many times throughout my CIMA studies.īut you’ve got to ask for help otherwise you will never move forward. This is nothing to be ashamed about as it’s easy to get lost with this particuarly difficult topic and you’re not supposed to understand everything on the CIMA syllabus right away. As you know on my blog, much of the content I create is in direct response to student questions, problems or challenges and this post is no different.Ī number of people have been left confused when it comes to understanding the calculations needed when it comes to determining a transfer price.