Question 1

Which of the following is not an advocate's opinion about the cost of decentralization?

Accepted Answer

A) Leads to optimal decision making. 
B) Leads to suboptimal decision making. 
C) Focus of manager's attention on the subunit rather than the company as a whole. 
D) Results in duplication of output. 
E) Results in duplication of activities. 
A) Leads to optimal decision making. 
B) Leads to suboptimal decision making. 
C) Focus of manager's attention on the subunit rather than the company as a whole. 
D) Results in duplication of output. 
E) Results in duplication of activities.

Question 2

The managerial accountant at Bottles for Less makes internal transfers at 175% of full cost.The Refining Division purchases 25,000 containers per day,on average,from a local supplier,who delivers the containers through an external shipper.
To determine if they can reduce costs,the company located an independent supplier in Virginia who is willing to sell 25,000 containers at $20 each,delivered to the Shipping Division in Wyoming.The company in Wyoming can ship the 25,000 containers at a variable cost of $2.50 per container.
Required
Compute the full cost to the company if it purchases the containers from the independent supplier.

Accepted Answer

A) $200,000 
B) $250,000 
C) $300,000 
D) $450,000 
E) $500,000 
A) $200,000 
B) $250,000 
C) $300,000 
D) $450,000 
E) $500,000

Question 3

The manager is accountable for revenues only in which of the following responsibility centers?

Accepted Answer

A) Cost Center. 
B) Clinic Center. 
C) Profit Center. 
D) Revenue Center. 
E) Investment Center. 
A) Cost Center. 
B) Clinic Center. 
C) Profit Center. 
D) Revenue Center. 
E) Investment Center.

Question 4

Which of the following is the price one subunit charges for a product or service supplied to another subunit of the same organization?

Accepted Answer

A) Unit cost. 
B) Turn price. 
C) Trade price. 
D) Transfer price. 
E) Recording price. 
A) Unit cost. 
B) Turn price. 
C) Trade price. 
D) Transfer price. 
E) Recording price.

Question 5

Which transfer-pricing method does not preserve subunit autonomy because it is rule-based?

Accepted Answer

A) Cost-based. 
B) Negotiated. 
C) Market-based. 
D) Minimum-based. 
E) Maximum-based. 
A) Cost-based. 
B) Negotiated. 
C) Market-based. 
D) Minimum-based. 
E) Maximum-based.

Question 6

Which of the following is not true about hybrid transfer prices?

Accepted Answer

A) Hybrid transfer prices take into account both cost and market information. 
B) Top management may administer prices by specifying a transfer price that is an average of the cost of producing and transporting the product internally. 
C) The most common form of hybrid price arises via negotiation. 
D) Information regarding costs and prices plays a critical role in this bargaining process. 
E) Managers never negotiate transfer prices because they will show as a loss of profits. 
A) Hybrid transfer prices take into account both cost and market information. 
B) Top management may administer prices by specifying a transfer price that is an average of the cost of producing and transporting the product internally. 
C) The most common form of hybrid price arises via negotiation. 
D) Information regarding costs and prices plays a critical role in this bargaining process. 
E) Managers never negotiate transfer prices because they will show as a loss of profits.

Question 7

The most common form of hybrid price arises via negotiation-the subunit managers are asked to negotiate the transfer price between them and to decide whether to transact internally,or deal with external parties.

Accepted Answer

A) True 
 B)False

Question 8

Under the U.S.Internal Revenue Code,organizations can obtain advanced approval of the transfer-pricing arrangements from the tax authorities,under which of the following?

Accepted Answer

A) Advance pricing agreement. 
B) Alternative apparel agreement. 
C) Alternative pricing arrangement. 
D) American Planning Association. 
E) American Psychiatric Association. 
A) Advance pricing agreement. 
B) Alternative apparel agreement. 
C) Alternative pricing arrangement. 
D) American Planning Association. 
E) American Psychiatric Association.

Question 9

Profit centers can be coupled with a highly centralized organization,and cost centers can be coupled with a highly decentralized organization,

Accepted Answer

A) True 
 B)False

Question 10

Scuba Tank Company manufactures only one type of oxygen tank;and,it has two divisions,the Compressor Division,and the Assembly Division.The Compressor Division manufactures compressors for the Assembly Division,which completes the oxygen tanks and sells it to retailers.The Compressor Division "sells" compressors to the Assembly Division.The market price for the Assembly Division to purchase a compressor is $41.50.(Ignore changes in inventory. )The fixed costs for the Compressor Division are assumed to be the same over the range of 6,000-9,000 units.The fixed costs for the Assembly Division are assumed to be $8.00 per unit at 9,000 units.
 
Required
Compute the transfer price per compressor from the Compressor Division to the Assembly Division if the method used to place a value on each compressor is 160% of variable costs.Compute the transfer price per compressor from the Compressor Division to the Assembly Division if the transfer price per compressor is 125% of full costs.Next,assume the transfer price for a compressor is 135% of total costs of the Compressor Division and 1,250 of the compressors are produced and transferred to the Assembly Division,and compute the Compressor Division's operating income.Compute the operating income of the Compressor Division and the Assembly Division if the Assembly Division sells 1,250 oxygen tanks at a price of $395.50 per oxygen tank.

Accepted Answer

A) $40.00;$48.50;$16,000.00;$112,025.50 
B) $42.00;$48.60;$16,500.00;$112,500.60 
C) $44.00;$48.75;$16,750.00;$112,750.70 
D) $48.00;$48.90;$17,015.50;$113,025.50 
E) $50.00;$49.06;$17,175.00;$114,062.50 
A) $40.00;$48.50;$16,000.00;$112,025.50 
B) $42.00;$48.60;$16,500.00;$112,500.60 
C) $44.00;$48.75;$16,750.00;$112,750.70 
D) $48.00;$48.90;$17,015.50;$113,025.50 
E) $50.00;$49.06;$17,175.00;$114,062.50

Question 11

Which of the following is not an issue a manager raises about full-cost transfer pricing?

Accepted Answer

A) How are each subunit's indirect costs allocated to products? 
B) Have the correct activities bases been identified? 
C) Have the correct cost pools been identified? 
D) Have the correct cost-allocation bases been identified? 
E) Have we considered that the current market price is a distress price? 
A) How are each subunit's indirect costs allocated to products? 
B) Have the correct activities bases been identified? 
C) Have the correct cost pools been identified? 
D) Have the correct cost-allocation bases been identified? 
E) Have we considered that the current market price is a distress price?

Question 12

Cost-based transfer prices are not useful when the internal product is different from the products available externally in terms of quality and customer service.

Accepted Answer

A) True 
 B)False

Question 13

Management control systems do not need to fit an organization's structure.

Accepted Answer

A) True 
 B)False

Question 14

The recent global recession has pushed governments around the world to impose tighter trading rules and more aggressively pursue tax revenues.

Accepted Answer

A) True 
 B)False

Question 15

Which transfer-pricing method preserves subunit autonomy when markets are competitive?

Accepted Answer

A) Cost-based. 
B) Negotiated. 
C) Market-based. 
D) Minimum-based. 
E) Maximum-based. 
A) Cost-based. 
B) Negotiated. 
C) Market-based. 
D) Minimum-based. 
E) Maximum-based.

Question 16

Vitamin D Dairy has two divisions,Distribution and Production.The company's primary product is milk.Each division's costs are provided below:
 
The Distribution Division has been operating at a capacity of 4,500,000 gallons a week and usually purchases 2,250,000 gallons from the Production Division and 2,250,000 gallons from other suppliers at $1.00 per gallon.
Required
What is the transfer price per gallon from the Production Division to the Distribution Division,assuming the method used to place a value on each gallon of milk is 170% of variable costs? Next,compute the transfer price per gallon from the Production Division to the Distribution Division,assuming the method used to place a value on each gallon of milk is 130% of full costs.
Assume 150,000 gallons are transferred from the Production Division to the Distribution Division for a transfer price of $0.85 per gallon.The Distribution Division sells the 150,000 gallons at a price of $1.20 each to customers.What is the operating income of both divisions together?

Accepted Answer

A)  $0.10; $0.60; $85,000 
B)  $0.12; $0.61; $90,000 
C)  $0.14; $0.62; $92,000 
D)  $0.16; $0.64; $94,000 
E)  $0.18; $0.66; $96,000 
A)  $0.10; $0.60; $85,000 
B)  $0.12; $0.61; $90,000 
C)  $0.14; $0.62; $92,000 
D)  $0.16; $0.64; $94,000 
E)  $0.18; $0.66; $96,000

Question 17

Which of the following is not true about the negotiated pricing method?

Accepted Answer

A) Negotiated pricing is the most common hybrid method. 
B) Under this method,top management does not administer a specific split of the eventual profits across the transacting divisions. 
C) The eventual transfer price result from a bargaining process between the selling and buying subunits. 
D) Divisions are not free to negotiate a price that is mutually acceptable to both. 
E) Price and cost information are usually the starting point in the negotiation process. 
A) Negotiated pricing is the most common hybrid method. 
B) Under this method,top management does not administer a specific split of the eventual profits across the transacting divisions. 
C) The eventual transfer price result from a bargaining process between the selling and buying subunits. 
D) Divisions are not free to negotiate a price that is mutually acceptable to both. 
E) Price and cost information are usually the starting point in the negotiation process.

Question 18

In reference to negotiated pricing,cost and price information is often the starting point in the negotiation process.

Accepted Answer

A) True 
 B)False

Question 19

Why are multinational companies often decentralized?

Accepted Answer

Multinational companies are of

Question 20

________ exists when individuals and groups work toward achieving the organization's goals.

Accepted Answer

A) Esteem 
B) Ability 
C) Motivation 
D) Determination 
E) Goal congruence 
A) Esteem 
B) Ability 
C) Motivation 
D) Determination 
E) Goal congruence

Which of the following is not an advocate's opinion about the cost of decentralization?

The manager is accountable for revenues only in which of the following responsibility centers?

Which of the following is the price one subunit charges for a product or service supplied to another subunit of the same organization?

Which transfer-pricing method does not preserve subunit autonomy because it is rule-based?

Which of the following is not true about hybrid transfer prices?

The most common form of hybrid price arises via negotiation-the subunit managers are asked to negotiate the transfer price between them and to decide whether to transact internally,or deal with external parties.

Under the U.S.Internal Revenue Code,organizations can obtain advanced approval of the transfer-pricing arrangements from the tax authorities,under which of the following?

Profit centers can be coupled with a highly centralized organization,and cost centers can be coupled with a highly decentralized organization,

Which of the following is not an issue a manager raises about full-cost transfer pricing?

Cost-based transfer prices are not useful when the internal product is different from the products available externally in terms of quality and customer service.

Management control systems do not need to fit an organization's structure.

The recent global recession has pushed governments around the world to impose tighter trading rules and more aggressively pursue tax revenues.

Which transfer-pricing method preserves subunit autonomy when markets are competitive?

Which of the following is not true about the negotiated pricing method?

In reference to negotiated pricing,cost and price information is often the starting point in the negotiation process.

Why are multinational companies often decentralized?

________ exists when individuals and groups work toward achieving the organization's goals.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Process Costing and Cost Allocation

Activity-Based Costing and Activity-Based Management

Pricing Decisions, customer Profitability, and Cost Management

Determining How Costs Behave

Decision Making and Relevant Information

Quality, inventory Management, and Time

Capital Investments

Master Budget and Responsibility Accounting

Flexible Budgets, cost Variances, and Management Control

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Performance Measurement and Compensation

Filters

Exam 15: Transfer Pricing

Which of the following is not an advocate's opinion about the cost of decentralization?

The manager is accountable for revenues only in which of the following responsibility centers?

Which of the following is the price one subunit charges for a product or service supplied to another subunit of the same organization?

Which transfer-pricing method does not preserve subunit autonomy because it is rule-based?

Which of the following is not true about hybrid transfer prices?

The most common form of hybrid price arises via negotiation-the subunit managers are asked to negotiate the transfer price between them and to decide whether to transact internally,or deal with external parties.

Under the U.S.Internal Revenue Code,organizations can obtain advanced approval of the transfer-pricing arrangements from the tax authorities,under which of the following?

Profit centers can be coupled with a highly centralized organization,and cost centers can be coupled with a highly decentralized organization,

Which of the following is not an issue a manager raises about full-cost transfer pricing?

Cost-based transfer prices are not useful when the internal product is different from the products available externally in terms of quality and customer service.

Management control systems do not need to fit an organization's structure.

The recent global recession has pushed governments around the world to impose tighter trading rules and more aggressively pursue tax revenues.

Which transfer-pricing method preserves subunit autonomy when markets are competitive?

Which of the following is not true about the negotiated pricing method?

In reference to negotiated pricing,cost and price information is often the starting point in the negotiation process.

Why are multinational companies often decentralized?

________ exists when individuals and groups work toward achieving the organization's goals.

The Manager and Management Accounting

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Process Costing and Cost Allocation

Activity-Based Costing and Activity-Based Management

Pricing Decisions, customer Profitability, and Cost Management

Determining How Costs Behave

Decision Making and Relevant Information

Quality, inventory Management, and Time

Capital Investments

Master Budget and Responsibility Accounting

Flexible Budgets, cost Variances, and Management Control

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Performance Measurement and Compensation

Filters