True false 23 if there is a competitive outside

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Exploring Macroeconomics
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Chapter 11 / Exercise 2a
Exploring Macroeconomics
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True False
23. If there is a competitive outside market for the transferred product, then the best transfer price is the cost-based transfer price.
24. In negotiated transfer pricing, the buying division sets the ceiling (maximum possible transfer price) for the bargaining range.
25. In negotiated transfer pricing, the selling division sets the ceiling (maximum possible transfer price) for the bargaining range.
26. The selling division would never agree to a transfer price below its full manufacturing cost. True False
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Exploring Macroeconomics
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Chapter 11 / Exercise 2a
Exploring Macroeconomics
Sexton
Expert Verified
27. A transfer price is the price charged for a component by the selling division to the buying division of the same company.
28. The price charged for the transferred good affects the costs of the buying division and the revenues of the selling division.
29. Transfer pricing is a complex issue.
30. When the selling division can sell and the buying division can buy externally at the market price, the company as a whole will be in the same position whether or not a market price transfer takes place internally. True False
31. Several transfer pricing policies are used in practice. These transfer pricing policies include market price, cost-based transfer prices, and negotiated transfer prices.
32. The selling division is forced to transfer a product internally when a cost-based transfer pricing policy is set by top management.
33. When a product is transferred at market price, the transfer will optimize both divisional and company-wide profits.
34. Select the term from below to match with the correct statement.1. A(n) ___________ is a responsibility center in which a manager is responsible for revenues, costs, and investments. cost center ____ 2. The practice of delegating decision-making authority to lower levels is __________. revenue center ____ 3. A(n) ___________ is a responsibility center in which a manager is responsible only for costs. investmentcenter ____ 4. The manager of a(n) ___________ is evaluated on the basis of income. profit center ____ 5. A(n) ___________ is a responsibility center in which a manager is responsible only for sales, or revenues. decentralization ____ 35. Select the appropriate definition for each of the items listed below.1. The ratio of sales to average operating assets. ROI ____ 2. The dollar difference between operating income and minimum required return on a company’s operating assets. Margin ____ 3. The ratio of operating income to sales. Turnover ____ 4. The most common measure of performance for an investment center. Residualincome ____ 36. In _______________ decision making, decisions are made at the very top level, and lower-level managers are charged with implementing these decisions. ________________________________________37. ________________ decision making allows managers at lower levels to make and implement key decisions pertaining to their areas of responsibility.

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