ExpertThis question is part of a case study — click to read the full scenario(Case 26)
Section B - Case 3: Quantum Nexus
Quantum Nexus is a cross-border tech hardware company.
Division A (located in Country X) manufactures microchips. Division B (located in Country Y) assembles these chips into smartphones.
Division A Data:
Variable cost per chip = $120
Fixed cost per chip = $30
External market selling price = $200
Division B Data:
External purchase price for similar chips = $190
Variable processing cost to assemble phone = $50
Final selling price of smartphone = $300
Division A currently has SPARE CAPACITY and can meet Division B's demand without losing external sales.
What is the minimum transfer price Division A should accept?
ACCA · Question 29 · Performance Measurement and Control
Section B - Case 3: Quantum Nexus
To achieve the tax savings, Quantum Nexus Head Office decides to dictate a transfer price of $120, overriding the divisional managers' autonomy.
What is the most likely behavioral consequence of this dictated transfer price on the manager of Division A?
Section B - Case 3: Quantum Nexus
To achieve the tax savings, Quantum Nexus Head Office decides to dictate a transfer price of $120, overriding the divisional managers' autonomy.
What is the most likely behavioral consequence of this dictated transfer price on the manager of Division A?
Answer options:
Increased motivation, as the manager knows they are helping the company save on taxes.
Demotivation, as Division A will show zero profit on these transfers, negatively impacting the manager's performance evaluation.
Goal congruence, as the manager will naturally want to transfer as many units as possible to Division B.
No behavioral impact, provided the manager is evaluated on Return on Investment (ROI).
How to approach this question
Full Answer
Common mistakes
Practice the full ACCA PM — Performance Management Practice Exam 5
32 questions · hints · full answers · grading