Services
Discover
Homeschooling
Ask a Question
Log in
Sign up
Filters
Done
Question type:
Essay
Multiple Choice
Short Answer
True False
Matching
Topic
Business
Study Set
Fundamentals of Cost Accounting Study Set 1
Quiz 15: Transfer Pricing
Path 4
Access For Free
Share
All types
Filters
Study Flashcards
Practice Exam
Learn
Question 1
True/False
A transfer made at cost does not motivate the selling division to transfer its goods or services internally.There is no profit for the selling division.
Question 2
True/False
In the United States,more companies use cost-based transfer prices than market-based transfer prices.Numerous surveys have shown this to be true.
Question 3
True/False
Transfer prices cannot be used for decision making,product costing,or performance evaluation.Transfer pricing is used in decision making,product costing,and performance evaluation.
Question 4
True/False
A market price-based transfer price policy allows the selling division to determine the price for transfers between divisions within the same organization.The market determines the price,not the division.
Question 5
True/False
A perfect intermediate market exists if buyers can buy and sellers can sell outside of the organization.A perfect market exists when buyers and sellers can have unlimited transactions with no impact on prices.
Question 6
True/False
From an organization's viewpoint,transfer prices have no effect on total profits assuming the transfer occurs between the two responsibility centers.Total profits are unaffected,divisional profits will have effects but they off-set.
Question 7
True/False
In general,the optimal transfer price for a division is the sum of its outlay costs and the opportunity cost of not transferring its goods to another division.It is the opportunity cost of the resource at the point of the transfer.Normally this is the lost contribution by not selling outside.
Question 8
True/False
Tax avoidance is unethical when inflated transfer prices are used in international transactions to shift profits from a division in one country to a division in another country.The key is "inflated" prices.Market based prices would not be unethical.
Question 9
True/False
The GAAP financial reporting rules for segments require that all companies use transfer prices based on market prices.GAAP does not specify what method must be used for transfer pricing except for the oil and gas industry.
Question 10
True/False
The use of an optimal transfer price eliminates potential conflicts between an organization's interests and the divisional manager's interest.Conflicts may be reduced,but will not be eliminated.
Question 11
True/False
A transfer price is the value assigned to the transfer of goods or services between divisions within the same organization.This is the definition of transfer pricing.
Question 12
True/False
A selling division at capacity is indifferent between selling to outsiders and transferring inside at the market price.The profit would be the same in either case.
Question 13
True/False
Transfer prices are not used to record the exchange between two cost centers within the same organization.Transfer prices are used for profit and investment centers.Cost centers are not concerned with profits.
Question 14
True/False
When actual costs are used as the basis for a transfer,inefficiencies of the selling division are transferred to the buying division.The selling division has no incentive to minimize the inefficiencies since they can all be passed on.
Question 15
True/False
An organization that has significant foreign operations must disclose how its transfer prices are established between domestic and foreign divisions.This is a requirement of GAAP.
Question 16
True/False
In general,negotiated transfer prices fall in a range between the selling division's differential costs and the buying division's market price.The seller's differential costs are the lowest the seller would accept;the buyer's market price is the highest the buyer would be willing to pay.
Question 17
True/False
If an intermediate market exists but divisions are prohibited from buying or selling from the outside,the intermediate market can be ignored in determining the optimal transfer price.Since the divisions are prohibited,the outside price is irrelevant.
Question 18
True/False
In interstate transactions,transfers can reduce an organization's tax liability when the selling division is in a lower tax jurisdiction than the buying division.The transfers can in effect move profits from one jurisdiction to another.