Question 1

Improving corporate control is an important advantage of decentralised operations.

Accepted Answer

A) True 
 B)False

Question 2

Answer the following questions using the information below:
The Betashoe Company manufactures shoes.It has two divisions: the Sole Division and the Assembly Division.The Sole Division manufactures soles for the Assembly Division,which completes the manufacturing of the shoes and sells the completed product to retailers.The Sole Division 'sells' pairs of soles to the Assembly Division.The market price for the Assembly Division to purchase a pair of soles is $20.(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 $7 per pair of shoes at 100 000 units.
 Costs per pair of soles are:
$\begin{array}{ll}
\text { Direct materials } & \$ 4 \
\text { Direct labour } & \$ 3 \
\text { Variable overhead } & \$ 2 \
\text { Division fixed costs } & \$ 1
\end{array}$

Assembly's costs per completed pair of shoes are:
$\begin{array} { l l } \text { Direct materials } & \$ 6 \ \text { Direct labour } & \$ 2 \ \text { Variable overhead } & \$ 1 \ \text { Division fixed costs } & \$ 7 \end{array}$
-If the method used to place a value on each pair of soles is 180% of variable costs,what is the transfer price per pair of soles from the Sole Division to the Assembly Division?

Accepted Answer

A) $12.60 
B) $28.80 
C) $16.20 
D) $14.40 
A) $12.60 
B) $28.80 
C) $16.20 
D) $14.40

Question 3

The benefits of a decentralised organisation are greater when a company:

Accepted Answer

A) is facing great uncertainties in their environment. 
B) has few interdependencies among divisions. 
C) is large and unregulated. 
D) All of these answers are correct. 
A) is facing great uncertainties in their environment. 
B) has few interdependencies among divisions. 
C) is large and unregulated. 
D) All of these answers are correct.

Question 4

Answer the following questions using the information below:
Bass Strait Oil Corporation has two divisions: Refining and Production.The company's primary product is Enkoil Oil.Each division's costs are provided below:
 $$\begin{array} { l l r } 
\text { Production: } & \text { Variable costs per barrel of oil } & \$ 3 \
& \text { Fixed costs per barrel of oil } & \$ 2 \
\text { Refining: } & \text { Variable costs per barrel of oil } & \$ 10 \
& \quad \text { Fixed costs per barrel of oil } & \$ 12
\end{array}$$
 The Refining Division has been operating at a capacity of 40 000 barrels a day and usually purchases
25 000 barrels of oil from the Production Division and 15 000 barrels from other suppliers at $20 per barrel.
-Assume 200 barrels are transferred from the Production Division to the Refining Division for a transfer price of $6 per barrel.The Refining Division sells the 200 barrels at a price of $40 each to customers.What is the operating profit of both divisions together?

Accepted Answer

A) $2400 
B) $2600 
C) $6800 
D) $3600 
A) $2400 
B) $2600 
C) $6800 
D) $3600

Question 5

Briefly describe the conditions that should be met for market-based transfer pricing to lead to optimal decision making among subunits of a large organisation.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

The conditions for which market-based tr

Question 6

What would be considered exertion towards a goal?

Accepted Answer

A) Incentive 
B) Goal congruence 
C) Motivation 
D) Effort 
A) Incentive 
B) Goal congruence 
C) Motivation 
D) Effort

Question 7

Hybrid (negotiated)transfer prices are often employed when:

Accepted Answer

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

Question 8

The Fruit Drink Company makes internal transfers at 160% of full cost.The Soda Refining Division purchases 40 000 containers of carbonated water per day,on average,from a local supplier who delivers the water for $40 per container via an external shipper.To reduce costs,the company located an independent supplier in Victoria who is willing to sell 40 000 containers at $30 each,delivered to The Fruit Drink Company's Shipping Division in Tasmania.The company's Shipping Division in Tasmania has excess capacity and can ship the 40 000 containers at a variable cost of $4.50 per container.What is the total cost of purchasing the water from the Victorian supplier and shipping it to the Soda Refining Division?

Accepted Answer

A) $180 000 
B) $1 380 000 
C) $1 600 000 
D) $1 200 000 
A) $180 000 
B) $1 380 000 
C) $1 600 000 
D) $1 200 000

Question 9

For each of the following Balanced Scorecard measures,identify which of the four perspectives (Financial,Customer,Internal Business Process,or Learning and Growth)the measure best represents.

a.On-time delivery of petrol from refineries to retail stations
b.Customer satisfaction
c.Share price
d.Return on investment
e.Market share
f.Number of days lost to accidents
g.Employee satisfaction
h.Friendliness of employees
i.Repeat purchases
j.Cash flow from operations

Accepted Answer

a.Internal business process
b.

Question 10

The Fruit Drink Company makes internal transfers at 180% of full cost.The Soda Refining Division purchases 30 000 containers of carbonated water per day,on average,from a local supplier who delivers the water for $30 per container via an external shipper.To reduce costs,the company located an independent supplier in Tasmania who is willing to sell 30 000 containers at $20 each,delivered to The Fruit Drink Company's Shipping Division in Tasmania.The company's Shipping Division in Tasmania has excess capacity and can ship the 30 000 containers at a variable cost of $2.50 per container.What is the total cost to The Fruit Drink Company if the carbonated water is purchased from the local supplier?

Accepted Answer

A) $900 000 
B) $1 501 000 
C) $1 200 000 
D) $1 620 000 
A) $900 000 
B) $1 501 000 
C) $1 200 000 
D) $1 620 000

Question 11

All of the following statements are correct,EXCEPT for:

Accepted Answer

A) The extent to which decisions are pushed downward,and the types of decisions that are pushed down,provide a measure of the level of centralisation/decentralisation in an organisation. 
B) A decentralised structure forces top management to lose some control over the organisation. 
C) Decentralisation slows responsiveness to local needs for decision making. 
D) A centralised structure does not empower employees to handle customer complaints directly. 
A) The extent to which decisions are pushed downward,and the types of decisions that are pushed down,provide a measure of the level of centralisation/decentralisation in an organisation. 
B) A decentralised structure forces top management to lose some control over the organisation. 
C) Decentralisation slows responsiveness to local needs for decision making. 
D) A centralised structure does not empower employees to handle customer complaints directly.

Question 12

A product may be passed from one subunit to another subunit in the same organisation.The product is known as a(n):

Accepted Answer

A) subunit product 
B) intermediate product 
C) transfer product 
D) interdepartmental product 
A) subunit product 
B) intermediate product 
C) transfer product 
D) interdepartmental product

Question 13

Flinders Street Consultancy has two divisions: Computer Services and Management Advisory Services.In addition to their external customers,each division performs work for the other division.The external fees earned by each division in 2017 were $200 000 for Computer Services and $350 000 for Management Advisory Services.Computer Services worked 3000 hours for Management Advisory Services,who in turn,worked 1200 hours for Computer Services.The total costs of external services performed by Computer Services were $110 000 and $240 000 by Management Advisory Services.
Required:
a.Determine the operating profit for each division and for the company as a whole if the transfer price from Computer Services to Management Advisory Services is $15 per hour and the transfer price from Management Advisory Services to Computer Services is $12.50 per hour.
b.Determine the operating profit for each division and for the company as a whole if the transfer price between divisions is $15 per hour.
c.What are the operating profit results for each division and for the company as a whole if the two divisions net the hours worked for each other and charge $12.50 per hour for the one with the excess? Which division manager prefers this arrangement?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

a.
*Computer Services = (3 000 - 1 200)h

Question 14

The choice of a transfer-pricing method has minimal effect on the allocation of company-wide operating profit among divisions.

Accepted Answer

A) True 
 B)False

Question 15

Answer the following questions using the information below:
The Betashoe Company manufactures shoes.It has two divisions: the Sole Division and the Assembly Division.The Sole Division manufactures soles for the Assembly Division,which completes the manufacturing of the shoes and sells the completed product to retailers.The Sole Division 'sells' pairs of soles to the Assembly Division.The market price for the Assembly Division to purchase a pair of soles is $20.(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 $7 per pair of shoes at 100 000 units.
 Costs per pair of soles are:
$\begin{array}{ll}
\text { Direct materials } & \$ 4 \
\text { Direct labour } & \$ 3 \
\text { Variable overhead } & \$ 2 \
\text { Division fixed costs } & \$ 1
\end{array}$

Assembly's costs per completed pair of shoes are:
$\begin{array} { l l } \text { Direct materials } & \$ 6 \ \text { Direct labour } & \$ 2 \ \text { Variable overhead } & \$ 1 \ \text { Division fixed costs } & \$ 7 \end{array}$
-If the Assembly Division sells 100 000 pairs of shoes at a price of $60 a pair to customers,what is the operating profit of both divisions together?

Accepted Answer

A) $2 600 000 
B) $3 400 000 
C) $3 000 000 
D) $4 400 000 
A) $2 600 000 
B) $3 400 000 
C) $3 000 000 
D) $4 400 000

Question 16

Describe how to avoid making suboptimal decisions when cost-based transfer pricing is used between subunits of a large organisation.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

When market prices are unavailable or to

Question 17

Cronulla Sportswear Company manufactures socks.The Athletic Division sells its socks for $6 a pair to outsiders.Socks have manufacturing costs of $2.50 per pair for variable and $1.50 for fixed.The division's total fixed manufacturing costs are $105 000 at the normal volume of 70 000 units.
The New Zealand Division has offered to buy 15 000 pairs of socks at the full cost of $4.The Athletic Division has excess capacity and the 15 000 pairs can be produced without interfering with the current outside sales of 70 000.The 85 000 volume is within the division's relevant operating range.
Explain whether the Athletic Division should accept the offer.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

Accepted Answer

\[\begin{array} { | l | r | } 
\hline \t

Question 18

What is a disadvantage of a negotiated transfer price?

Accepted Answer

A) negotiations usually require much time and energy 
B) negotiated transfer price preserves divisional autonomy 
C) each division manager must put forth effort to increase division operating profit 
D) Both B and C are correct. 
A) negotiations usually require much time and energy 
B) negotiated transfer price preserves divisional autonomy 
C) each division manager must put forth effort to increase division operating profit 
D) Both B and C are correct.

Question 19

Additional factors that arise in multinational transfer pricing include tariffs and customs duties levied on imports of products into a country.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is NOT a benefit of decentralisation?

Accepted Answer

A) Sharpens the focus of managers 
B) Leads to quicker decision making 
C) Decreases management and worker morale 
D) Creates greater responsiveness to local needs 
A) Sharpens the focus of managers 
B) Leads to quicker decision making 
C) Decreases management and worker morale 
D) Creates greater responsiveness to local needs

Improving corporate control is an important advantage of decentralised operations.

The benefits of a decentralised organisation are greater when a company:

Briefly describe the conditions that should be met for market-based transfer pricing to lead to optimal decision making among subunits of a large organisation. _ _

What would be considered exertion towards a goal?

Hybrid (negotiated)transfer prices are often employed when:

All of the following statements are correct,EXCEPT for:

A product may be passed from one subunit to another subunit in the same organisation.The product is known as a(n):

The choice of a transfer-pricing method has minimal effect on the allocation of company-wide operating profit among divisions.

Describe how to avoid making suboptimal decisions when cost-based transfer pricing is used between subunits of a large organisation. _ _

What is a disadvantage of a negotiated transfer price?

Additional factors that arise in multinational transfer pricing include tariffs and customs duties levied on imports of products into a country.

Which of the following is NOT a benefit of decentralisation?

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Capital Budgeting and Cost Analysis

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters

Exam 19: Management Control Systems, Transfer Pricing and Multinational Considerations

Improving corporate control is an important advantage of decentralised operations.

The benefits of a decentralised organisation are greater when a company:

What would be considered exertion towards a goal?

Hybrid (negotiated)transfer prices are often employed when:

All of the following statements are correct,EXCEPT for:

A product may be passed from one subunit to another subunit in the same organisation.The product is known as a(n):

The choice of a transfer-pricing method has minimal effect on the allocation of company-wide operating profit among divisions.

What is a disadvantage of a negotiated transfer price?

Additional factors that arise in multinational transfer pricing include tariffs and customs duties levied on imports of products into a country.

Which of the following is NOT a benefit of decentralisation?

Management Accounting in Context

Different Costs for Different Purposes

Determining How Costs Behave

Costvolumeprofit Analysis

Estimating the Cost of Producing Services

Estimating the Costs of Products and Inventory

Target Costing, Managing Activities and Managing Capacity

Activity-Based Management and Activity-Based Costing

Pricing and Customer Profitability

Decision Making and Relevant Information

Budgeting, Management Control and Responsibility Accounting

Flexible Budgets, Direct Cost Variances and Management Control

Flexible Budgets, Overhead Cost Variances and Management Control

Allocation of Support-Department Costs, Common Costs and Revenues

Strategy Formation, Strategic Control and the Balanced Scorecard

Quality, Time and the Balanced Scorecard

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

Capital Budgeting and Cost Analysis

Performance Measurement, Compensation and Multinational Considerations

Measuring and Reporting Sustainability

Filters