Supply Chain Profit Split
A three-party chain: a contract manufacturer sells to the principal, which sells to a limited-risk distributor, which sells to customers. See how the two transfer prices set each routine return and leave the residual with the principal. Shown in one currency; FX and full journal entries are in the single-transaction builder.
Profit split across the chain
| Entity | Return basis | Profit (USD) | Share |
|---|---|---|---|
| Manufacturer | cost + 8% | 80,000 | 32% |
| Principal (residual) | entrepreneur | 125,000 | 50% |
| Distributor | 3% of sales | 45,000 | 18% |
| Group total | 250,000 | 100% |
The two transfer prices fix the routine returns for the manufacturer and the distributor; whatever is left is the principal's residual as the entrepreneur. The three add up to group profit.
How the value flows
| Step | Amount (USD) |
|---|---|
| Manufacturer cost | 1,000,000 |
| Sells to principal at | 1,080,000 |
| Principal sells to distributor at | 1,255,000 |
| Distributor sells to customers at | 1,500,000 |
Both intra-group sales (manufacturer to principal, principal to distributor) eliminate on consolidation, leaving the customer sale and the group's true cost. Use the single-transaction builder for each leg's journal entries, FX, true-ups, and country tax analysis.
Educational decision-support, not accounting, tax, or legal advice. Shown in one currency for clarity; figures are simplified and positions should be reviewed with your advisors.