Exam 15: Transfer Pricing

Review the transfer-price methods listed below and choose the best transfer-price method ideal to managers when prices of products and services listed in trade association Web sites are competitive.

Which of the following is not true about subunits in decentralized organizations?

Negotiated pricing is the most common hybrid method.

Which of the following is an organizational structure that gives managers at lower levels the freedom to make decisions?

Cost-based transfer prices are helpful in each of the following except:

To approximate market prices,cost-based transfer prices are sometimes set at full cost plus a margin.

How can the employee or manager's effort go beyond physical exertion?

The transfer price a company will eventually choose depends on the economic circumstances and the decision at hand.

Centralization slows decision making because responsibility for decisions creeps upward through layer after layer of management.

Under imperfect competition,the transfer price should be set at a suitable ________ to the external price in order to induce the manager of the buying division to seek internal transfers.

Which transfer-pricing method is useful for determining full cost of products and services?

How does a manager know which transfer price to judge performance if distress prices prevail in the short-run versus the long-run?

Which of the following refers to the degree of freedom to make decisions?

Job rotation combined with decentralization helps develop the ability of managers to operate in the global environment.

Transfer pricing is an important accounting priority for managers only in the United States.

The managerial accountant at Orbit Distribution Company reported that the Transportation Division transports 110 barrels of crude oil at $1 per barrel.The Refining Division's reported the variable cost is $7 per barrel to refine 110 barrels of crude oil and produce 50 barrels of gasoline. Required Compute the variable cost of the Transportation Division to transport crude oil and the cost to the Refining Division to refine the crude oil and produce the gasoline.What are the total variable costs? Show all work.

Under the ________ method,top management does not administer a specific split of the eventual profits across the transacting decisions.

Accountants indicated that the full-cost-based transfer price is generally the most frequently used transfer-pricing method around the world.

________ ease the subunit managers' information-processing and decision-making tasks.

The cost used in cost-based transfer prices can only be the actual cost.