Filters
Question type
Study Flashcards

Bill's Computer Parts has two decentralized divisions,Hardware and Pre-Fab.Pre-Fab has always purchased certain units from Hardware at $230 per unit.Because Hardware plans to raise the price to $260 per unit,Pre-Fab desires to purchase these units from outside suppliers for $230 per unit.Hardware's costs follow: variable costs per unit,$200;annual fixed costs,$30,000.Annual production of these units for Pre-Fab is 1,500 units.If Pre-Fab buys from an outside supplier,the facilities Hardware uses to manufacture these units would remain idle. Required: What would be the result if Bill's Computer Parts' management enforces a transfer price of $260 per unit between Hardware and Pre-Fab?

Correct Answer

verifed

verified

It would cost the company $45,000 if Pre...

View Answer

Management's challenge is to set transfer prices so that both the buyer and seller have goal congruence with respect to the organization's goals.How is this accomplished?


A) With no intervention from top management to set the transfer price for each transaction between divisions.
B) With top management establishing transfer price policies that divisions follow.
C) With division managers not engaging in negotiation to set transfer prices among themselves.
D) All of the answers are correct.

E) All of the above
F) None of the above

Correct Answer

verifed

verified

The minimum desired ROI rate


A) is based on industry averages.
B) is based on a division's operating characteristics.
C) is equal to the company's cost of funds.
D) is set by generally accepted accounting principles.

E) A) and D)
F) B) and D)

Correct Answer

verifed

verified

Engine Division The Engine Division provides engines for the Tractor Division of a company.The standard unit costs for Engine Division are as follows: Engine Division The Engine Division provides engines for the Tractor Division of a company.The standard unit costs for Engine Division are as follows: Refer to the Engine Division.What is the transfer price based on variable product costs plus a fixed fee of $210? A) $210. B) $1,800. C) $2,100 D) $2,310. Refer to the Engine Division.What is the transfer price based on variable product costs plus a fixed fee of $210?


A) $210.
B) $1,800.
C) $2,100
D) $2,310.

E) C) and D)
F) All of the above

Correct Answer

verifed

verified

Framing Division The Framing Division had the following data: Framing Division The Framing Division had the following data: Refer to the Framing Division.What is the return on investment for Year 2010? A) 10%. B) 16%. C) 20%. D) 24%. Refer to the Framing Division.What is the return on investment for Year 2010?


A) 10%.
B) 16%.
C) 20%.
D) 24%.

E) All of the above
F) None of the above

Correct Answer

verifed

verified

What has spawned a major political issue concerning the estimated cost to the United States Treasury of as much as $9 billion to $13 billion per year in lost taxes that could presumably be collected if transfer prices were calculated according to U.S.tax laws?


A) Tax avoidance by foreign companies using inflated transfer prices to reduce the profit of U.S.subsidiaries.
B) Tax avoidance by domestic,United States,companies using inflated transfer prices to reduce the foreign profit of U.S.subsidiaries.
C) Tax avoidance by foreign companies using deflated transfer prices to reduce the profit of U.S.subsidiaries.
D) Tax avoidance by domestic,United States,companies using deflated transfer prices to reduce the profit of foreign subsidiaries.

E) All of the above
F) B) and C)

Correct Answer

verifed

verified

To achieve organizational goal congruence,how should management set transfer prices?


A) To allow for divisional autonomy and encourage managers to pursue corporate goals consistent with their own personal goals.
B) Top management should set the selling division's revenue and the buying division's cost.
C) Transfer prices should be compatible with the company's performance evaluation system.
D) All of the answers are correct.

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

The following information relates to the operating performance of three divisions of Santos,Inc.for last year. The following information relates to the operating performance of three divisions of Santos,Inc.for last year. Required: a.Compute the rate of return on investment (ROI)of each division for last year. b.Assume that the firm levies a charge on each division for the use of funds.The charge is 10 percent on investment,and the accounting system deducts it in measuring divisional net income.Recalculate ROI using divisional net income after deduction of the use-of-funds charge in the numerator. c.Which of these two measures do you think gives the better indication of operating performance? Explain your reasoning. Required: a.Compute the rate of return on investment (ROI)of each division for last year. b.Assume that the firm levies a charge on each division for the use of funds.The charge is 10 percent on investment,and the accounting system deducts it in measuring divisional net income.Recalculate ROI using divisional net income after deduction of the use-of-funds charge in the numerator. c.Which of these two measures do you think gives the better indication of operating performance? Explain your reasoning.

Correct Answer

verifed

verified

a.
blured image_TB2144_00 b.
blured image_TB2144_00 c.As the a...

View Answer

Dukes Computing Systems Dukes Computing Systems manufactures and sells various computer products and has two decentralized divisions: (1) Production and (2) Marketing.The Marketing Division has always purchased a particular motherboard from Production at $65 per unit.The Production Division is considering raising the price to $75 per unit.The Production Division's costs related to the motherboard production is as follows: Dukes Computing Systems Dukes Computing Systems manufactures and sells various computer products and has two decentralized divisions: (1) Production and (2) Marketing.The Marketing Division has always purchased a particular motherboard from Production at $65 per unit.The Production Division is considering raising the price to $75 per unit.The Production Division's costs related to the motherboard production is as follows: The Marketing Division handles the promotion and distribution of the motherboard purchases from the Production Division and sells each motherboard for $125.Marketing Division incurs monthly fixed costs of $5,000.Marketing Division sells 2,000 units per month.Marketing Division can buy the same motherboard from outside suppliers for $75. Refer to Dukes Computing Systems.If the Marketing Division purchases the motherboard from outside suppliers,the facilities the Production Division uses to manufacture the motherboard would remain idle.The Production Division is operating below capacity because of weak global demand for the product. What should be the motherboard transfer price be between the Production Division and Marketing Division in order for Dukes' to optimize profits? A) $ 55 B) $ 65 C) $ 75 D) $125 The Marketing Division handles the promotion and distribution of the motherboard purchases from the Production Division and sells each motherboard for $125.Marketing Division incurs monthly fixed costs of $5,000.Marketing Division sells 2,000 units per month.Marketing Division can buy the same motherboard from outside suppliers for $75. Refer to Dukes Computing Systems.If the Marketing Division purchases the motherboard from outside suppliers,the facilities the Production Division uses to manufacture the motherboard would remain idle.The Production Division is operating below capacity because of weak global demand for the product. What should be the motherboard transfer price be between the Production Division and Marketing Division in order for Dukes' to optimize profits?


A) $ 55
B) $ 65
C) $ 75
D) $125

E) None of the above
F) C) and D)

Correct Answer

verifed

verified

Which of the following best indicates how much shareholder wealth is being created by company managers?


A) Return on investment divided by total assets.
B) Return on investment divided by total liabilities.
C) Return on investment divided by retained earnings.
D) Economic value added (EVA) .

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

Young Company has a tax rate of 40 percent.Information for the company is as follows: Young Company has a tax rate of 40 percent.Information for the company is as follows: What is the EVA if the before-tax operating income is $1,500,000? A) $1,134,000 B) $402,000 C) $534,000 D) $(198,000) What is the EVA if the before-tax operating income is $1,500,000?


A) $1,134,000
B) $402,000
C) $534,000
D) $(198,000)

E) A) and D)
F) A) and C)

Correct Answer

verifed

verified

Framing Division The Framing Division had the following data: Framing Division The Framing Division had the following data: Refer to the Framing Division.What is the return on investment for Year 2008? A) 10%. B) 16%. C) 20%. D) 24%. Refer to the Framing Division.What is the return on investment for Year 2008?


A) 10%.
B) 16%.
C) 20%.
D) 24%.

E) All of the above
F) A) and B)

Correct Answer

verifed

verified

Young Company has a tax rate of 40 percent.Information for the company is as follows: Young Company has a tax rate of 40 percent.Information for the company is as follows: What is the weighted cost of capital? A) 0.1098 B) 0.2480 C) 0.0827 D) 0.0366 What is the weighted cost of capital?


A) 0.1098
B) 0.2480
C) 0.0827
D) 0.0366

E) B) and C)
F) A) and B)

Correct Answer

verifed

verified

Terrapin Computing Systems Terrapin Computing Systems manufactures and sells various computer products and has two decentralized divisions: (1) Production and (2) Marketing.The Marketing Division has always purchased a particular large tower case from Production at $58 per unit.The Production Division is considering raising the price to $75 per unit.The Production Division's costs related to the large tower case production is as follows: Terrapin Computing Systems Terrapin Computing Systems manufactures and sells various computer products and has two decentralized divisions: (1) Production and (2) Marketing.The Marketing Division has always purchased a particular large tower case from Production at $58 per unit.The Production Division is considering raising the price to $75 per unit.The Production Division's costs related to the large tower case production is as follows: The Marketing Division handles the promotion and distribution of the large tower case purchases from the Production Division and sells each large tower case for $100.Marketing Division incurs monthly fixed costs of $5,000.Marketing Division sells 2,000 units per month.Marketing Division can buy the same large tower case from outside suppliers for $75. Refer to Terrapin Computing Systems.If the Marketing Division purchases the large tower case from outside suppliers,the facilities the Production Division uses to manufacture the large tower case would remain idle.The Production Division is operating below capacity because of weak global demand for the product. What should be the large tower case transfer price between the Production Division and Marketing Division in order for Terrapin to optimize profits? A) $ 55 B) $ 58 C) $ 75 D) $100 The Marketing Division handles the promotion and distribution of the large tower case purchases from the Production Division and sells each large tower case for $100.Marketing Division incurs monthly fixed costs of $5,000.Marketing Division sells 2,000 units per month.Marketing Division can buy the same large tower case from outside suppliers for $75. Refer to Terrapin Computing Systems.If the Marketing Division purchases the large tower case from outside suppliers,the facilities the Production Division uses to manufacture the large tower case would remain idle.The Production Division is operating below capacity because of weak global demand for the product. What should be the large tower case transfer price between the Production Division and Marketing Division in order for Terrapin to optimize profits?


A) $ 55
B) $ 58
C) $ 75
D) $100

E) C) and D)
F) None of the above

Correct Answer

verifed

verified

What transfer pricing mechanism generally applies a normal markup to costs as a surrogate for market prices when intermediate market prices are not available?


A) Fixed price-based transfer pricing
B) Full-absorption costing
C) Activity-based costing
D) Cost-plus transfer pricing

E) A) and D)
F) A) and C)

Correct Answer

verifed

verified

Which of the following statements is true concerning economic value added (EVA) ?


A) EVA alleviates the shortcoming of the return on investment measurement.
B) EVA calculates a percentage for comparison purposes.
C) EVA is required by the New York Stock Exchange.
D) EVA is the same as economic payback analysis.

E) B) and C)
F) A) and D)

Correct Answer

verifed

verified

Framing Division The Framing Division had the following data: Framing Division The Framing Division had the following data: Refer to the Framing Division.What is the investment turnover ratio for Year 2010? A) 1.0 B) 1.5 C) 1.6 D) 2.0 Refer to the Framing Division.What is the investment turnover ratio for Year 2010?


A) 1.0
B) 1.5
C) 1.6
D) 2.0

E) None of the above
F) B) and D)

Correct Answer

verifed

verified

Which of the following is(are) the transfer price that would leave the buying division no worse off if an input is purchased from an internal division.


A) The negotiated transfer price.
B) The minimum transfer price.
C) The maximum transfer price.
D) Both a.and c.

E) B) and C)
F) All of the above

Correct Answer

verifed

verified

A shortcoming of return on investment (ROI) is that it may not lead managers to accept good investment opportunities if


A) ROI of the investment is higher than the present ROI of the division.
B) the ROI of the investment is the same as the present ROI of the division.
C) the ROI of the investment is lower than the present ROI of the division.
D) None of the answers is correct.

E) A) and B)
F) B) and D)

Correct Answer

verifed

verified

Dukes Computing Systems Dukes Computing Systems manufactures and sells various computer products and has two decentralized divisions: (1) Production and (2) Marketing.The Marketing Division has always purchased a particular motherboard from Production at $65 per unit.The Production Division is considering raising the price to $75 per unit.The Production Division's costs related to the motherboard production is as follows: Dukes Computing Systems Dukes Computing Systems manufactures and sells various computer products and has two decentralized divisions: (1) Production and (2) Marketing.The Marketing Division has always purchased a particular motherboard from Production at $65 per unit.The Production Division is considering raising the price to $75 per unit.The Production Division's costs related to the motherboard production is as follows: The Marketing Division handles the promotion and distribution of the motherboard purchases from the Production Division and sells each motherboard for $125.Marketing Division incurs monthly fixed costs of $5,000.Marketing Division sells 2,000 units per month.Marketing Division can buy the same motherboard from outside suppliers for $75. Refer to Dukes Computing Systems.The Production Division is operating at maximum capacity because of strong worldwide demand for the product and the Production Division can sell all it produces to outside customers for $75 per motherboard. What should be the motherboard transfer price between the Production Division and Marketing Division in order for Dukes' to optimize profits? A) $ 55 B) $ 65 C) $ 75 D) $125 The Marketing Division handles the promotion and distribution of the motherboard purchases from the Production Division and sells each motherboard for $125.Marketing Division incurs monthly fixed costs of $5,000.Marketing Division sells 2,000 units per month.Marketing Division can buy the same motherboard from outside suppliers for $75. Refer to Dukes Computing Systems.The Production Division is operating at maximum capacity because of strong worldwide demand for the product and the Production Division can sell all it produces to outside customers for $75 per motherboard. What should be the motherboard transfer price between the Production Division and Marketing Division in order for Dukes' to optimize profits?


A) $ 55
B) $ 65
C) $ 75
D) $125

E) None of the above
F) A) and C)

Correct Answer

verifed

verified

Showing 21 - 40 of 126

Related Exams

Exam 1

Fundamental Concepts

114 Questions

Exam 2

Measuring Product Costs

125 Questions

Exam 3

Activity-Based Management

139 Questions

Exam 4

Strategic Management of Costs,quality,and Time

146 Questions

Exam 5

Cost Drivers and Cost Behavior

114 Questions

Exam 6

Financial Modeling for Short-Term Decision Making

120 Questions

Exam 7

Differential Cost Analysis for Operating Decisions

186 Questions

Exam 8

Capital Expenditure Decisions

126 Questions

Exam 9

Profit Planning and Budgeting

126 Questions

Exam 10

Profit and Cost Center Performance Evaluation

100 Questions

Exam 12

Incentive Issues

123 Questions

Exam 13

Allocating Costs to Responsibility Centers

93 Questions

Show Answer