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 30 · Performance Measurement and Control
Section B - Case 3: Quantum Nexus
To resolve the conflict between tax optimization and managerial motivation, Quantum Nexus considers implementing a 'Dual Pricing' system.
How does a dual pricing system operate in this context?
Answer options:
Both divisions record the transfer at the external market price, but pay taxes at the variable cost rate.
Division A records the transfer at a high price (e.g., market price) to show profit, while Division B records the purchase at a low price (e.g., variable cost), with Head Office reconciling the difference.
The transfer price is changed every six months to balance the profits between the two divisions.
Division A sells to Division B at variable cost, but receives a year-end cash bonus from Division B.
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