Sales by a subsidiary to its parent affects the operating income of the parent when the merchandise is resold.

Question

Quizplus · Accepted Answer

When a subsidiary sells merchandise to its parent company, the revenue and cost of goods sold affect the subsidiary's operating income. However, the resale of the merchandise by the parent affects the parent's revenue and cost of goods sold, which in turn affects the parent's operating income. Therefore, sales by a subsidiary to its parent can have an impact on the parent's operating income.

Sales by a Subsidiary to Its Parent Affects the Operating