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CA Final Divisional Transfer Pricing — practice questions

Explore 41 free Divisional Transfer Pricing questions in CA Final Cost and Management Accounting. Open each question or exercise to read its content, reference answers and available explanation.

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Divisional Transfer Pricing questions and exercises with answers

Showing questions 1–30 of 41.

Which method uses prices from comparable deals between unrelated parties?Read the answer and worked solution →Under the cost-plus method of testing a transfer price, what is compared?Read the answer and worked solution →In a residual profit split, what happens first?Read the answer and worked solution →The best method rule picks the method giving which result?Read the answer and worked solution →The comparable profits method compares a tested party with whom?Read the answer and worked solution →Which statistical range do US regulations use to judge an arm's length range?Read the answer and worked solution →An arm's length price is generally treated as what?Read the answer and worked solution →Nearly all national transfer pricing rules are built on which principle?Read the answer and worked solution →When may a tax authority recharacterize a related-party deal?Read the answer and worked solution →A tax authority usually makes transfer pricing adjustments at which stage?Read the answer and worked solution →A group minimising worldwide tax sets transfer prices to put more profit where?Read the answer and worked solution →Which metrics does formulary apportionment use to split group profit?Read the answer and worked solution →What improves the reliability of CPM and TNMM results?Read the answer and worked solution →A selling division can sell the part in a competitive outside market. What price does it face?Read the answer and worked solution →Profit-maximising output is where which two measures are equal?Read the answer and worked solution →The 2015 OECD BEPS reports called for which new reporting?Read the answer and worked solution →Reporting falsified invoice prices to customs to hide illicit transfers is called what?Read the answer and worked solution →A manager answerable for both revenue and costs heads which centre?Read the answer and worked solution →Which responsibility centre has the lowest level of responsibility?Read the answer and worked solution →Which responsibility centre enjoys the highest delegated autonomy?Read the answer and worked solution →Which metric most commonly judges an investment centre manager?Read the answer and worked solution →Cost centre managers are mainly judged on what?Read the answer and worked solution →A profit centre manager chooses inputs and outputs but not what?Read the answer and worked solution →Which is a typical example of a profit centre?Read the answer and worked solution →Responsibility accounting reports revenue and cost data by what?Read the answer and worked solution →Fixed cost Rs 60,000, variable Rs 1,40,000, 5,000 units, 20% markup. Price per unit?Read the answer and worked solution →A division's unit cost is Rs 250 and the group sets cost plus 18%. Transfer price?Read the answer and worked solution →A transfer price of Rs 690 includes a 15% markup on cost. What is the unit cost?Read the answer and worked solution →With demand elasticity of 4, price over marginal cost is 1/(1-1/E). If MC is Rs 90, the price?Read the answer and worked solution →If demand elasticity is infinite, what markup over marginal cost results?Read the answer and worked solution →

Worked practice questions

Which method uses prices from comparable deals between unrelated parties?

  1. Cost-plus method
  2. Resale price method
  3. Profit split method
  4. Comparable price method
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Correct answer: D. Comparable price method

CUP takes the arm's-length price directly from comparable transactions between independent parties.

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Under the cost-plus method of testing a transfer price, what is compared?

  1. Discount percentages
  2. Inventory turnover
  3. Tax rates paid
  4. Markup percentages
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Correct answer: D. Markup percentages

Goods sold to unrelated parties at cost plus a fixed markup are tested by comparing the markups.

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In a residual profit split, what happens first?

  1. Profit is shared equally
  2. Tax is deducted from all profit
  3. Residual goes to the parent
  4. Routine operations get profit
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Correct answer: D. Routine operations get profit

The two-step process first rewards routine operations and only then splits the residual on nonroutine contributions.

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