Exam 13: Responsibility Accounting,support Department Allocations,and Transfer Pricing

A binding contract between a company and one or more national taxing authorities that provides the details of how transfer prices will be set is referred to as a(n)_____________________________________________.

Decentralization is a transfer of authority from the bottom to the top of an organization.

The most straight-forward method of assigning service department costs to revenue-producing areas is the direct method.

A management decision may be beneficial for a given profit center,but not for the entire company.From the overall company viewpoint,this decision would lead to

Which service department cost allocation method assigns indirect costs to cost objects after considering some of the interrelationships of the cost objects?

Ecology Solutions Corporation The Green Division of Ecology Solutions Co.has developed a wind generator that requires a special "S" ball bearing.The Ball Bearing Division of Ecology Solutions Co.has the capability to produce such a ball bearing. Unfortunately,the Ball Bearing Division is operating at capacity and will need to reduce production of another existing product,the "T" bearing,by 1,000 units per month to provide the 600 "S" bearings needed each month by the Green Division.The "T" bearing currently sells for $50 per unit.Variable costs incurred to produce the "T" bearing are $30 per unit;variable costs to produce the new "S" bearing would be $60 per unit. The Green Division has found an external supplier that would furnish the needed "S" bearings at $100 per unit.Assume that both the Green Division and Ball Bearing Division are independent,autonomous investment centers. Refer to Ecology Solutions Co.What factors besides price would Green Division want to consider in deciding where it will purchase the bearing?

Decentralization reduces the need for effective communication among an organization's departments.

The maximum of the transfer price negotiation range is

If a division is set up as an autonomous profit center,then goods should not be transferred

What term identifies an accounting system in which the operations of the business are broken down into reportable segments,and the control function of a foreperson,sales manager,or supervisor is emphasized?

In computing a transfer price,the maximum price should be no higher than the highest market price at which the buying segment can obtain the good or service externally.

In evaluating the performance of a profit center manager,he/she should be evaluated on

Which of the following is not an objective for computing full cost?

Castle Homes Corporation The Carpet Division of Castle Homes Corporation manufactures a single grade of residential grade carpeting.The division has the capacity to produce 500,000 square yards of carpet each year.Its current costs and revenues are shown here: Sales (400,000 square yards)                                 $\$ 2,000,000$ Variable costs per square yard: Production                                                             $\$ 2.00$ SG&A                                                                      1.00 Fixed costs per square yard (based on 500,000 yard capacity) Production                                                               $\$ 0.50$ SG&A                                                                      1.00 The Housing Division currently purchases 40,000 yards of carpeting (of the grade produced by the Carpet Division)each year at a cost of $6.50 per square yard from an outside vendor. Refer to Castle Homes Corporation.If the Housing and Carpet Divisions agree on the internal transfer of 40,000 square yards of carpet at a price of $4.50 per square yard,how will the profits of the Housing Division be affected?

Which of the following is more characteristic of a decentralized than a centralized business structure?