Seminar 9 – Transfer Pricing – B Limited
Variable cost per tonne
Fixed cost per month
Wholesale £
70
100,000
Retail £
60
40,000
(a) Prepare estimated profit statements for the month of December for each
group and for B Limited as a whole based on transfer prices of £200 per
tonne and of £180 per tonne when producing at:
(i) 80% capacity
(ii) 100% capacity utilizing the extra sales to supply the retail trade;
Statement showing monthly profit of Whole sale Division, Retail Division and
Company as a whole under 80% capacity utilization of whole sale division and
Rs.180 transfer Price
(b) Comment on the results achieved under (a) and the effect of the change in
the transfer price;
(c) Propose an alternative transfer price for the retail sales which would
provide greater incentive for increasing sales, detailing any problems that might
be encountered