Describe the Candy company transaction flow

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Reference no: EM132817685

Question - Transfer Pricing - As a candy manufacturer company, candy company supplies their products to Sugar Candy store and Sweet Candy store. Candy company is supplying 100 kgs to Sugar Candy and 500 kg to Sweet Candy store monthly. Candy company has a product cost of USD100 per kg. Candy company sells candy to other customers besides Sugar Candy and Sweet candy for USD200 per kg. Sugar candy gets prices from other suppliers at USD170 perkg, while Sweet candy gets 2,000 cheaper prices per kg than Sugar candy because they buy more. In general, Candy company's production capacity is 2 (two) tons per month. During the 3rd quarter, Candy company's sales had risen drastically and faced with the following conditions:

Describe the Candy company transaction flow with the two companies and explain with each of the transfer pricing calculations for Sugar candy and Sweet candy including explaining using upper limit and lower limit charts (10%).

a) Demand from customers is full up to 2 (two) tons in July because it is the dry season. As a supplier, the Candy company felt that they couldn't help but they need to supply Sugar candy and Sweet candy.

b) In August, Candy company increased its capacity to 3 tons to meet the needs of consumers and learned from last month that must continue to supply Sugar candy and Sweet candy.

c) In September, Candy company also produced 3 tons to be able to supply all customers as well as candy and Sweet candy needs.

Reference no: EM132817685

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