Transfer Pricing (No Excess Capacity)

This video discusses transfer pricing when the selling division does not have excess capacity.
When the selling division does not have excess capacity, this means it could sell 100% of the units it produces to outside customers. In such a case, the selling division is only willing to accept a transfer price that is at least as high as the market price (the price for which it can sell the product to outside customers).-
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[@basharhuda]

By making this KZbin channel you are now less of a mortal and more of an immortal. This is the best accounting KZbin channel out there. I pay thousands in tuition but no one can teach at your level! I truly appreciate your efforts from the bottom of my heart. May you always succeed and be happy.

[@TaseTea]

I just want to thank you for all the tutorials you do, I'm in accounting and use a lot of your older videos to help with exams. Other channels don't compare to your audio clarity, teaching skills and application of your examples, Thanks!

[@RoshanKumar-hi2wi]

The best video on transfer price I have seen, your way explaining is awsm,,,, Thankyou so much dear for making the videos

[@asibabdul8862]

Love your work!! I was looking to see if there are any videos covering ISO vs NSO

[@Lalit_14]

Thank you so much your video is very helpful for me. 😇

[@omercma9262]

amazing work

[@ashvinirao5834]

Thank you thank you 😊

[@sddlee4893]

Why the price is not between $34 to $38? As the full cost is $34.

[@violavelvette529]

It's interesting to see another method of calculating the minimum acceptable price for sellers with the $5 incremental savings from shipping. You computed $40 SP (external cx. charged) - $5 savings. I did the textbook way: relevant cost (VC of $17, plus incremental cost of transfer, which is $0) + opportunity cost of $40 - $22 = $18 (lost CM) from foregoing external sales = $35. Both makes sense.

[@waqashussain2310]

won't incremental cost be the fixed ?

[@jeshmeetakumar1823]

Great thank you so much

[@Edspira]

You are very welcome

[@marlinehab]

there is a mistake in calculation after 5 dollars saving the incremental cost is 34 not 35 so the range of the transfer price 34 to 38

[@waqashussain2310]

I had a feeling about this too , are you 100% sure that's correct ?

[@ani-mations6787]

@@waqashussain2310 Not quite, I think it's because there is a $1 mark-up between cost of production and the selling price, this is why initially FC+VC = $39, yet SP = $40. With a $5 reduction in VC, that $1 in mark-up is still there to ensure the seat division can make a profit so the minimum transfer price falls to $35 instead of $34. In simple words, at $34, they're breaking even, at $35 they're making a $1 profit! I'm not 100% sure if this is correct but this is my interpretation