08 X07 B responsibility

08 X07 B responsibility - Responsibility Accounting and...

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Responsibility Accounting and Transfer Pricing (B. Transfer Pricing) B. TRANSFER PRICING THEORIES: Nature 5. Transfer prices are charges for A. transportation of goods outside units of an organization. B. goods sold by subunits to outside customers. C. goods exchanged among subunits. D. goods stored within a subunit. 23. A transfer price is a price charged A. to outside customers B. when one division sells its goods or services to another division C. by the selling division to the buying division when outside market does not exist D. a and b 24. Transfer prices are A. necessary to calculate costs in a cost, profit, or investment center B. preferred by buying divisions are the lowest possible C. do not make any difference for the company's bottom-line no matter what number is used D. all of the above 36. Which of the following is a key factor to consider in deciding whether to make internal transfers, and, if so, in setting the transfer price? A. Is there an outside supplier? B. Is the seller's variable cost less than the market price/ C. Is the selling unit operating at full capacity? D. All of the above are key factors. 32. From the standpoint of the company, the important question in transfer pricing is A. what is fair to the divisions B. how to determine the profit of the divisions C. whether or not the transfer should take place D. when the transfer should be made Objectives 1. The objective of a transfer pricing system should be to A. maximize the transfer price B. minimize the transfer price C. maintain goal congruence between the divisions and the entire firm D. none of the above 2. The objective(s) of transfer pricing are A. to motivate managers B. to provide an incentive for managers to make decisions consistent with the firm's goals (i.e., goal congruence) C. to provide a basis for fairly rewarding the managers D. all of the above 4. A transfer pricing system should satisfy which of the following objectives? A. accurate performance evaluation C. goal congruence B. preservation of divisional autonomy D. all of the above 34. The market price method satisfy a key objective of transfer pricing, namely: A. objectivity C. consistency B. usability D. reliability Irrelevant costs 29. Which item is usually not relevant to a decision by a divisional manager to reduce a transfer price to meet a price offered to another division by an outside supplier? A. opportunity cost B. variable manufacturing costs C. fixed divisional overhead D. the price offered by the outside supplier General rule 137
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Responsibility Accounting and Transfer Pricing (B. Transfer Pricing) 9. The general rule in establishing transfer prices consistent with economic decision making is the A. differential cost plus opportunity cost if goods are transferred internally.
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This note was uploaded on 11/22/2010 for the course CAC BSA taught by Professor Kairus during the Spring '10 term at Korea University.

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08 X07 B responsibility - Responsibility Accounting and...

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