Exam 10: Management Control in Decentralized Organizations

What is the general benchmark for transfer prices? The transfer price equals ________ plus ________.

Multinational companies use transfer prices to minimize worldwide income taxes,________ and ________.

Decentralization is the delegation of freedom to make decisions.

The following information is available for the Super Company: What is the operating income?

The rate of return on gross book value will not change if operating income remains constant.

Captain Company's records reveal the following: Variable costs: The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier.Division Y can buy the component for $32 per unit from an outside supplier.Division X has no excess capacity.What is the highest price per unit that Division Y should pay to Division X for the components?

Division Y sells a food product internally to Division Z.Division Z uses the food product to produce vegetarian burgers that sell for $5 per pound.Division Y incurs costs of $0.75 per pound to produce the food product and sells the food product to Division Z for $1.00 per pound.Division Z incurs additional costs of $2.50 per pound to produce the final product of vegetarian burgers.Division Z can purchase the food product needed from outside suppliers for $0.75 per pound,but does not do so.Which formula should be used to determine the company's operating income?

A management by objectives approach stresses budgeted results.

There is(are)________ goal(s)of transfer pricing systems.There is no universally ________ transfer price.

The following information pertains to Saturn Company: Invested capital is defined as total assets minus current liabilities.The after-tax cost of capital is 10%.What is the economic profit?

Frazier Company's revenues are $300 on invested capital of $240.Expenses are currently 84% of sales.If Frazier Company can reduce its expenses to 70% of sales,return on investment will be ________.

A firm is a good candidate for decentralization if ________.

Decentralization is most successful when an organization's segments are relatively independent of one another.

If market prices are not available for transfer prices,most companies use ________ transfer prices.

The Johnsen Company has gathered the following data: Required: A)Compute ROI assuming invested capital is equal to total assets. B)Compute ROI assuming invested capital is equal to total assets minus current liabilities. C)Compute ROI assuming invested capital is equal to stockholders' equity.

The opportunity cost of transferring an item internally is the contribution to profit that the selling segment foregoes by transferring the item internally.

Frances Company's records reveal the following: Variable costs: The variable costs of Division Y will be incurred whether it buys from Division X or from an outside supplier.Assume Division X has excess capacity.Division Y can buy the component from an outside supplier for $32 per unit.What is the lowest transfer price per unit at which Division X would be willing to sell to Division Y?

When compared to a decentralized organization,there are really no advantages to a centralized organization.

In a multinational setting,low transfer prices generally lead to low import duties.

________ is the process by which organizations concentrate decision making within a particular location or group.