Transfer Pricing (Part1)

This video explains transfer pricing (part 1) in simple ways.
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[@mmesomastevens]

Mr Ezikan, thank you so much sir. I passed PM Nov 2022 diet. Thank you for making PM so easy to understand. May God bless you immensely,Amen.

[@Ezikan]

Amen I am very happy for you Congratulations

[@funtobello4619]

Thank you sir for the lecture well explained

[@chetanmore3617]

Explained very well in simplest manner Possible very easy to understand. 🙏🙏

[@glory5101]

THANK YOU, SIR

[@blessingmaya7906]

Q. Am some how confused, the transfer price that we calculated( VC + opportunity cost) is it what the selling division will sale it to the buying division or the external customer.

[@Ezikan]

Variable cost of the selling division plus the opportunity cost of transferring it internally

[@Ezikan]

Opportunity cost is the benefits forgone elsewhere as a result of transferring the goods internally

[@cassandraigbanugo9754]

Sir,please what's the difference between minimum and maximum transfer price. How is it applied

[@Ezikan]

I have a video on it. Check the channel. You may be asked to determine the minimum transfer price that the selling division will be willing to accept and the Maximum transfer price that the buying division can accept

[@quameatu]

Very clear .Thanks for the.lecture.how did we get this text books so badly written

[@rosenwachukwu4745]

Good morning sir. May GOD BLESS you for your concern over our Success in this exams. Please Sir I'm confused somewhere. I thought that Marginal Costing doesn't Consider Fixed Cost While Full Cost do (if I'm wrong please direct me well I will appreciate it). Assuming I'm correct Sir why when calculating TRANSFER PRICE using MARGINAL COST you ADDED FIXED COST instead of SUBTRACTING from the Gross profit to arrive at the Net Profit?. Thanks

[@Ezikan]

You said full cost. Not marginal cost

[@lawalmaimunat4098]

But I do not see any limitations on the example

[@emmanuella487]

It was a DEMAND LIMITATION

[@missp759]

Thank you Sir

[@alittleabouteverything4784]

Thank you sir

[@okoyeokoye9844]

Well done sir

[@alasinrinhairat5471]

thanks so much sir

[@lawalmaimunat4098]

Why didn't we do 10/110 for markup

[@Ezikan]

Margin is a profit expressed as proportion of sales revenue. While mark up ís the profit expressed as a proportion of cost price. When you are given percentage mark up often written as cost plus and sales revenue is given, to calculate the profit, use 10/110 if profit mark up ís given. But if it is written as margin or mark up on sales, it should be 10/100

[@houseofjemjemima7892]

Thank you Sir

[@abimbolaadeleke7281]

Thanks for the lecture Sir. My question is on the second solution of the first example. The transfer is made externally so should the cost of packaging which applies to internal transfer be deducted from the market price.

[@Ezikan]

I don't understand your question. Transfer cannot be made externally. Anytime the word transfer is used, it is an internal arrangements (Internal Sales). Where it involves the group and the third party (External), it is called sales and not transfer

[@Ezikan]

Yes. Where transfer is used, the transaction is not between the member of the group. That is the reason we used to eliminate the inter-company items in consolidated financial statements. So that the connected parties transaction which was not conducted in an arm length will not appear in the consolidated financial statements. Because connected parties transactions may be influence thereby making a group accounts to be misleading.

[@odusolasamuel953]

I'm asking this same question, The packing cost relief should be for only internal transfer (and should be added not subtracted from the external sales)