Question 1

Suboptimal decision making is also called congruent decision making.

Accepted Answer

A) True 
 B)False

Question 2

Number of processes with real time feedback would be an example of a Balanced Scorecard control measure from a customer perspective.

Accepted Answer

A) True 
 B)False

Question 3

A(n)________ is a binding agreement between a multinational and the United States Internal Revenue Service to obtain approval for a specific transfer price for a number of years.

Accepted Answer

A) Tax Treaty 
B) Advanced Pricing Agreement 
C) Revenue Ruling 
D) Dual Price Ruling 
A) Tax Treaty 
B) Advanced Pricing Agreement 
C) Revenue Ruling 
D) Dual Price Ruling

Question 4

Answer the following questions using the information below:
Calculate the Division operating income for the AlphaShoe Company which manufactures only one type of shoe and has two divisions, the Sole Division, and the Assembly Division. The Sole Division manufactures soles for the Assembly Division, which completes the shoe and sells it to retailers. The Sole Division "sells" soles to the Assembly Division. The market price for the Assembly Division to purchase a pair of soles is $40. (Ignore changes in inventory.)The fixed costs for the Sole Division are assumed to be the same over the range of 40,000-100,000 units. The fixed costs for the Assembly Division are assumed to be $14 per pair at 100,000 units.
    
-What is the transfer price per pair of soles from the Sole Division to the Assembly Division if the method used to place a value on each pair of soles is 180% of variable costs?

Accepted Answer

A) $28.80 
B) $25.20 
C) $32.40 
D) $57.60 
A) $28.80 
B) $25.20 
C) $32.40 
D) $57.60

Question 5

An advantage of a negotiated transfer price is the:

Accepted Answer

A) close relationship between the negotiated price and the market price 
B) negotiated transfer price preserves divisional autonomy 
C) negotiations usually do not require much time and energy 
D) Both B and C are correct. 
A) close relationship between the negotiated price and the market price 
B) negotiated transfer price preserves divisional autonomy 
C) negotiations usually do not require much time and energy 
D) Both B and C are correct.

Question 6

Which of the following transfer-pricing methods always achieves goal congruence?

Accepted Answer

A) a market-based transfer price 
B) a cost-based transfer price 
C) a negotiated transfer price 
D) full-cost plus a standard profit margin 
A) a market-based transfer price 
B) a cost-based transfer price 
C) a negotiated transfer price 
D) full-cost plus a standard profit margin

Question 7

In a profit center, the manager is accountable for investments, revenues, and costs.

Accepted Answer

A) True 
 B)False

Question 8

Cost-based transfer prices are helpful when:

Accepted Answer

A) a market exists for the product 
B) a price is easy to obtain 
C) the product is unique 
D) All of these answers are correct. 
A) a market exists for the product 
B) a price is easy to obtain 
C) the product is unique 
D) All of these answers are correct.

Question 9

All of the following are benefits of decentralization EXCEPT that it:

Accepted Answer

A) creates greater responsiveness to local needs 
B) decreases management and worker morale 
C) leads to quicker decision making 
D) sharpens the focus of managers 
A) creates greater responsiveness to local needs 
B) decreases management and worker morale 
C) leads to quicker decision making 
D) sharpens the focus of managers

Question 10

If an oil refinery used refinery down-time as a Balanced Scorecard control measure, it would represent the ________ perspective.

Accepted Answer

A) financial 
B) customer 
C) internal business process 
D) learning and growth 
A) financial 
B) customer 
C) internal business process 
D) learning and growth

Question 11

Cost-based transfer pricing is a better method when the products being transferred are specialized in nature.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is NOT a characteristic of a management control system?

Accepted Answer

A) It aids and coordinates the process of making decisions. 
B) It encourages short-term profitability. 
C) It motivates individuals throughout the organization to act in concert. 
D) It coordinates forecasting sales and cost-driver activities, budgeting, and measuring and evaluating performance. 
A) It aids and coordinates the process of making decisions. 
B) It encourages short-term profitability. 
C) It motivates individuals throughout the organization to act in concert. 
D) It coordinates forecasting sales and cost-driver activities, budgeting, and measuring and evaluating performance.

Question 13

The seller of a product has no idle capacity and can sell all it can produce at $33 per unit. Outlay cost is $9. What is the opportunity cost, assuming the seller sells internally?

Accepted Answer

A) $6 
B) $12 
C) $24 
D) $33 
A) $6 
B) $12 
C) $24 
D) $33

Question 14

What is the term used to describe the situation when a manager's decision, which benefits one subunit, is more than offset by the costs to the organization as a whole?

Accepted Answer

A) suboptimal decision making 
B) dysfunctional decision making 
C) congruent decision making 
D) Both A and B are correct. 
A) suboptimal decision making 
B) dysfunctional decision making 
C) congruent decision making 
D) Both A and B are correct.

Question 15

Negotiated transfer prices are often employed when:

Accepted Answer

A) market prices are stable 
B) market prices are volatile 
C) market prices change by a regular percentage each year 
D) goal congruence is not a major objective 
A) market prices are stable 
B) market prices are volatile 
C) market prices change by a regular percentage each year 
D) goal congruence is not a major objective

Question 16

Of the four perspectives of the balanced scorecard the customer perspective refers to employee satisfaction, absenteeism, information systems capabilities, and number of processes with real-time feedback.

Accepted Answer

A) True 
 B)False

Question 17

Global Giant, a multinational corporation, has a producing subsidiary in a low tax rate country and a marketing subsidiary in a high tax country. If Global Giant wants to minimize its worldwide tax liability, we would expect Global Giant to:

Accepted Answer

A) stop producing in the low tax rate country 
B) stop marketing in the high tax rate country 
C) establish a low transfer price when the producing unit sells to the marketing unit 
D) establish a high transfer price when the producing unit sells to the marketing unit 
A) stop producing in the low tax rate country 
B) stop marketing in the high tax rate country 
C) establish a low transfer price when the producing unit sells to the marketing unit 
D) establish a high transfer price when the producing unit sells to the marketing unit

Question 18

The range over which two divisions will negotiate a transfer price is:

Accepted Answer

A) between the supplying division's variable cost and the market price of the product 
B) between the supplying division's variable cost and its full cost of the product 
C) it could be anywhere above the supplying division's full cost of the product 
D) between the supplying division's full cost and 180% above its full cost 
A) between the supplying division's variable cost and the market price of the product 
B) between the supplying division's variable cost and its full cost of the product 
C) it could be anywhere above the supplying division's full cost of the product 
D) between the supplying division's full cost and 180% above its full cost

Question 19

Transfer prices should be judged by whether they promote:

Accepted Answer

A) goal congruence. 
B) the balanced scorecard method. 
C) a high level of subunit autonomy in decision making. 
D) Both A and C are correct. 
A) goal congruence. 
B) the balanced scorecard method. 
C) a high level of subunit autonomy in decision making. 
D) Both A and C are correct.

Question 20

The seller of Product A has no idle capacity and can sell all it can produce at $60 per unit. Outlay cost is $12. What is the opportunity cost, assuming the seller sells internally?

Accepted Answer

A) $12 
B) $48 
C) $60 
D) $72 
A) $12 
B) $48 
C) $60 
D) $72

Exam 22: Management Control Systems, Transfer Pricing, and Multinational Considerations

Suboptimal decision making is also called congruent decision making.

Number of processes with real time feedback would be an example of a Balanced Scorecard control measure from a customer perspective.

A(n)________ is a binding agreement between a multinational and the United States Internal Revenue Service to obtain approval for a specific transfer price for a number of years.

An advantage of a negotiated transfer price is the:

Which of the following transfer-pricing methods always achieves goal congruence?

In a profit center, the manager is accountable for investments, revenues, and costs.

Cost-based transfer prices are helpful when:

All of the following are benefits of decentralization EXCEPT that it:

If an oil refinery used refinery down-time as a Balanced Scorecard control measure, it would represent the ________ perspective.

Cost-based transfer pricing is a better method when the products being transferred are specialized in nature.

Which of the following is NOT a characteristic of a management control system?

The seller of a product has no idle capacity and can sell all it can produce at $33 per unit. Outlay cost is $9. What is the opportunity cost, assuming the seller sells internally?

What is the term used to describe the situation when a manager's decision, which benefits one subunit, is more than offset by the costs to the organization as a whole?

Negotiated transfer prices are often employed when:

Of the four perspectives of the balanced scorecard the customer perspective refers to employee satisfaction, absenteeism, information systems capabilities, and number of processes with real-time feedback.

Global Giant, a multinational corporation, has a producing subsidiary in a low tax rate country and a marketing subsidiary in a high tax country. If Global Giant wants to minimize its worldwide tax liability, we would expect Global Giant to:

The range over which two divisions will negotiate a transfer price is:

Transfer prices should be judged by whether they promote:

The seller of Product A has no idle capacity and can sell all it can produce at $60 per unit. Outlay cost is $12. What is the opportunity cost, assuming the seller sells internally?

The Accountants Role in the Organization

An Introduction to Cost Terms and Purposes

Cost-Volume-Profit Analysis

Job Costing

Activity-Based Costing and Activity-Based Management

Master Budget and Responsibility Accounting

Flexible Budgets, Direct-Cost Variances, and Management Control

Flexible Budgets, Overhead Cost Variances, and Management Control

Inventory Costing and Capacity Analysis

Determining How Costs Behave

Decision Making and Relevant Information

Pricing Decisions and Cost Management

Strategy, Balanced Scorecard, and Strategic Profitability Analysis

Cost Allocation, Customer-Profitability Analysis, and Sales-Variance Analysis

Allocation of Support-Department Costs, Common Costs, and Revenues

Cost Allocation: Joint Products and Byproducts

Process Costing

Spoilage, Rework, and Scrap

Balanced Scorecard: Quality, Time, and the Theory of Constraints

Inventory Management, Just-In-Time, and Simplified Costing Methods

Capital Budgeting and Cost Analysis

Performance Measurement, Compensation, and Multinational Considerations

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