Question 1

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B.Information about these divisions is given below:  
-The company uses the opportunity cost approach to transfer pricing.Which case should not be transferred internally?
A) Case 1
B) Case 2
C) Neither should be transferred internally.
D) Both should be transferred internally.

Accepted Answer

The answer of In the Ambros Company, Division A has...

Question 2

Transfer prices are the prices charged
A) for distributing goods from one warehouse to another.
B) for the goods produced by one division to another division that needs these goods.
C) when delivering goods to the customer.
D) when transferring goods to international divisions.

Accepted Answer

Transfer prices are the prices charged for goods produced by one division of a company to another division that needs these goods. This allows for internal allocation of costs and profits within the company.

Question 3

Which of the following managerial rewards is NOT a short-term reward?
A) stock ownership
B) cash bonuses
C) stock options
D) both a and b

Accepted Answer

Stock ownership is typically considered a long-term reward, as it incentivizes managers to focus on the overall performance and success of the company in the long run. Cash bonuses and stock options, on the other hand, are usually short-term rewards meant to incentivize specific goals or performance in a given period. Therefore, the correct answer is A) stock ownership.

Question 4

As a managerial reward, _______________ encourage(s) a short-term orientation.
A) cash bonuses
B) stock options
C) stock ownership
D) both a and b

Accepted Answer

The answer of As a managerial reward, _______________ encourage(s) a...

Question 5

Which of the following is a political or legal factor affecting performance evaluation in the multinational firm?
A) social attitude toward industry and business
B) literacy rate
C) effect of defense policy
D) currency restrictions

Accepted Answer

The effect of defense policy is a political factor that can affect performance evaluation in a multinational firm. Changes in defense policy can have an impact on a company's operations, particularly if they are involved in industries related to defense. This can lead to changes in regulations, licensing requirements, and other factors that can affect a company's ability to operate efficiently and effectively. Social attitudes toward industry and business, literacy rate, and currency restrictions are not directly related to political or legal factors affecting performance evaluation in multinational firms.

Question 6

_______________ 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

Accepted Answer

The answer of _______________ is(are) the transfer price that would...

Question 7

Which of the following is an economic factor affecting performance evaluation in the multinational firm?
A) currency restrictions
B) economic stability
C) impact of foreign policy
D) both a and b

Accepted Answer

Currency restrictions and economic stability are both economic factors that can affect the performance evaluation of a multinational firm. Currency restrictions can limit the ability of the firm to conduct international transactions and can affect the value of its assets and liabilities. Economic stability can impact the demand for the firm's products or services, as well as its ability to access resources and capital. Both of these factors are important considerations in evaluating the performance of a multinational firm. The impact of foreign policy may also be a relevant factor, but it is not strictly an economic consideration.

Question 8

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B.Information about these divisions is given below:  
-The company uses the opportunity cost approach to transfer pricing.What is the maximum transfer price in Case 2?
A) $75
B) $74
C) $68
D) $58

Accepted Answer

The answer of In the Ambros Company, Division A has...

Question 9

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B.Information about these divisions is given below: 
- The company uses the opportunity cost approach to transfer pricing.What is the minimum transfer price in Case 1?
A) $90
B) $86
C) $83
D) $73

Accepted Answer

The answer of In the Ambros Company, Division A has...

Question 10

_______________ is(are) the transfer price that would leave the selling division no worse off if the good is sold to an internal division.
A) The negotiated transfer price
B) The minimum transfer price
C) The maximum transfer price
D) Both a and c

Accepted Answer

The minimum transfer price is the transfer price that ensures the selling division is no worse off by selling to the internal division rather than selling to an external customer. This is because the selling division should at least cover its variable costs and not operate at a loss. The negotiated transfer price and the maximum transfer price do not necessarily guarantee that the selling division will not be worse off, as they may not consider the selling division's costs and profitability.

Question 11

The Engine Division provides engines for the Tractor Division of a company.The standard unit costs for Engine Division are as follows:  What is the best transfer price to avoid transfer price problems?
A) $2,730
B) $600
C) $1,800
D) $2,100

Accepted Answer

The answer of The Engine Division provides engines for the...

Question 12

Division 'A' produces a component and wants to sell it to Division 'B'.The transfer price is
A) revenue to Division 'A' and a cost to Division 'B'
B) revenue to Division 'B' and a cost to Division 'A'
C) revenue to Division 'A' and no effect on Division 'B'
D) a cost to Division 'B' and no effect on Division 'A'

Accepted Answer

The transfer price is considered revenue for the selling division (Division A) because it represents the income received from selling the component. For the buying division (Division B), this transfer price is a cost because it represents the expense incurred to acquire the component.

Question 13

It is important to separate the evaluation of the manager from the evaluation of the division in a multinational firm.A manager's evaluation should NOT include
A) revenues.
B) income taxes.
C) operating costs.
D) cost of goods sold.

Accepted Answer

Income taxes are not directly under the control of the manager and are more related to the overall performance of the division and the applicable tax laws. The evaluation of the manager should focus on factors that are directly related to their performance and decision-making, such as revenues, operating costs, and cost of goods sold.

Question 14

Comparison of an international division's ROI can potentially be misleading because of
A) the absence of activity-based management.
B) differing production technologies.
C) the lack of good information.
D) differing environmental factors.

Accepted Answer

The answer of Comparison of an international division's ROI can...

Question 15

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B.Information about these divisions is given below:  
-The company uses the opportunity cost approach to transfer pricing.What is the maximum transfer price in Case 1?
A) $91
B) $90
C) $83
D) $73

Accepted Answer

The maximum transfer price using the opportunity cost approach is the market price, which is $91 in this case.

Question 16

When there is an outside market for an intermediate product that is perfectly competitive, the most equitable method of transfer pricing is
A) market price.
B) production cost pricing.
C) variable cost pricing.
D) cost plus markup pricing.

Accepted Answer

Market price is the most equitable method of transfer pricing when there is an outside market for an intermediate product that is perfectly competitive. This is because the market price reflects the true supply and demand conditions, and ensures that the intermediate product is being sold at a fair price to both the selling and buying divisions of the company.

Question 17

Goal congruence can be defined as
A) an incentive plan arranged so the managers' goals are allied with the shareholders' goals.
B) managers operating the business in the best interest of the shareholders.
C) tying management rewards to shareholder results.
D) all of these are correct.

Accepted Answer

Goal congruence is achieved when the goals of the managers are aligned with the goals of the shareholders. This can be achieved through incentive plans, operating the business in the best interest of the shareholders, and tying management rewards to shareholder results. Therefore all of the options listed in the question are correct.

Question 18

Negotiated prices are transfer prices
A) determined between a division and corporate headquarters.
B) negotiated with external customers.
C) used when supplying and buying divisions independently agree on a price.
D) agreed to by division management and employees.

Accepted Answer

Negotiated prices are transfer prices that are agreed upon by supplying and buying divisions independently. They are not determined by corporate headquarters or agreed to solely by division management and employees. They are also not negotiated with external customers, as transfer prices relate to transactions within a company.

Question 19

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B.Information about these divisions is given below: 
- The company uses the opportunity cost approach to transfer pricing.What is the minimum transfer price in Case 2?
A) $75
B) $74
C) $68
D) $58

Accepted Answer

The answer of In the Ambros Company, Division A has...

Question 20

Which of the following is NOT an environmental factor affecting performance evaluation in the multinational firm?
A) sociological factors
B) economic factors
C) political or legal factors
D) All of these are environmental factors affecting performance evaluation in the multinational firm.

Accepted Answer

All of these factors (sociological, economic, political or legal) are environmental factors that can affect performance evaluation in a multinational firm. None of them are exempt or less important than the others.

Quiz 10: Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B.Information about these divisions is given below: -The company uses the opportunity cost approach to transfer pricing.Which case should not be transferred internally?

Transfer prices are the prices charged

Which of the following managerial rewards is NOT a short-term reward?

As a managerial reward, _______________ encourage(s) a short-term orientation.

Which of the following is a political or legal factor affecting performance evaluation in the multinational firm?

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

Which of the following is an economic factor affecting performance evaluation in the multinational firm?

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B.Information about these divisions is given below: -The company uses the opportunity cost approach to transfer pricing.What is the maximum transfer price in Case 2?

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B.Information about these divisions is given below: - The company uses the opportunity cost approach to transfer pricing.What is the minimum transfer price in Case 1?

_______________ is(are) the transfer price that would leave the selling division no worse off if the good is sold to an internal division.

The Engine Division provides engines for the Tractor Division of a company.The standard unit costs for Engine Division are as follows: What is the best transfer price to avoid transfer price problems?

Division 'A' produces a component and wants to sell it to Division 'B'.The transfer price is

It is important to separate the evaluation of the manager from the evaluation of the division in a multinational firm.A manager's evaluation should NOT include

Comparison of an international division's ROI can potentially be misleading because of

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B.Information about these divisions is given below: -The company uses the opportunity cost approach to transfer pricing.What is the maximum transfer price in Case 1?

When there is an outside market for an intermediate product that is perfectly competitive, the most equitable method of transfer pricing is

Goal congruence can be defined as

Negotiated prices are transfer prices

In the Ambros Company, Division A has a product that can be sold either to outside customers or to Division B.Information about these divisions is given below: - The company uses the opportunity cost approach to transfer pricing.What is the minimum transfer price in Case 2?

Which of the following is NOT an environmental factor affecting performance evaluation in the multinational firm?