Question 1

Which of the following is a drawback of decentralizing a multinational company?

Accepted Answer

A)  It may lead to increased exchange rate risk. 
B)  It may result in lack of control and results in increasing risk. 
C)  It creates less responsiveness to the needs of a subunit's customers, suppliers, and employees. 
D)  It may lead to an increase in bureaucracy. 
A)  It may lead to increased exchange rate risk. 
B)  It may result in lack of control and results in increasing risk. 
C)  It creates less responsiveness to the needs of a subunit's customers, suppliers, and employees. 
D)  It may lead to an increase in bureaucracy. B

Question 2

Aerated Water 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 Missouri who is willing to sell 30,000 containers at $22 each,delivered to Aerated Water Company's Shipping Division in Missouri.The company's Shipping Division in Missouri has excess capacity and can ship the 30,000 containers at a variable cost of $1.50 per container.What is the total cost to Aerated Water Company if the carbonated water is purchased from the local supplier?

Accepted Answer

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

Question 3

An organization should design its management control system independently of its strategies,so that the system is not affected by change of strategies in future.

Accepted Answer

A) True 
 B)False  False

Question 4

Answer the following questions using the information below:
Division A sells ground veal internally to Division B, which in turn, produces veal burgers that sell for $10 per pound. Division A incurs costs of $1.25 per pound while Division B incurs additional costs of $5.00 per pound.
-What is Division A's operating income per burger,assuming the transfer price of the ground veal is set at $2.00 per burger?

Accepted Answer

A)  $0.75 
B)  $1.50 
C)  $2.25 
D)  $3.00 
A)  $0.75 
B)  $1.50 
C)  $2.25 
D)  $3.00

Question 5

Transfer-pricing systems enable managers to focus on maximizing the performance of their subunits.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following markets is said to exist when there is a homogeneous product with many sellers?

Accepted Answer

A)  monopoly market 
B)  oligopoly market 
C)  monopolistic market 
D)  perfect market 
A)  monopoly market 
B)  oligopoly market 
C)  monopolistic market 
D)  perfect market

Question 7

Goal congruence exists when individuals work toward achieving one goal,and groups work toward achieving a different goal.

Accepted Answer

A) True 
 B)False

Question 8

Decentralization in multinational companies may lead to lack of control.

Accepted Answer

A) True 
 B)False

Question 9

Answer the following questions using the information below:
Axelia Corporation has two divisions, Refining and Extraction. The company's primary product is Luboil Oil. Each division's costs are provided below:
 $$\begin{array} { l c c } 
\text { Extraction: } & \text { Variable costs per barrel of oil } & \$ 7 \
& \text { Fixed costs per barrel of oil } & \$ 5 \
\text { Refining: } & \text { Variable costs per barrel of oil } & \$ 28 \
& \text { Fixed costs per barrel of oil } & \$ 32
\end{array}$$ 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 Extraction Division and 15,000 barrels from other suppliers at $60 per barrel.
-Assume 200 barrels are transferred from the Extraction Division to the Refining Division for a transfer price of $18 per barrel.The Refining Division sells the 200 barrels at a price of $120 each to customers.What is the operating income of both divisions together?

Accepted Answer

A)  $7,200 
B)  $9,600 
C)  $10,800 
D)  $20,400 
A)  $7,200 
B)  $9,600 
C)  $10,800 
D)  $20,400

Question 10

In the context of transfer pricing,which of the following represents the maximum contribution margin forgone by the selling subunit if the product or service is transferred internally?

Accepted Answer

A)  sub-optimal transfer price 
B)  notional loss 
C)  compromise sale 
D)  opportunity cost 
A)  sub-optimal transfer price 
B)  notional loss 
C)  compromise sale 
D)  opportunity cost

Question 11

Match between columns
                        Premises: Bargaining between selling and buying units
Budgeted costs
145% of full costs
Internal product transfers are required if goods are available internally
Manufacturing costs plus marketing costs plus distribution costs plus customer service costs
Prices listed in a trade journal
Selling price less normal sales commissions
Variable manufacturing cost plus a markup

Accepted Answer

The Answer of market-based and cost-based and negotiated and all is...

Question 12

When cost-based transfer pricing is used between subunits of a large organization,describe how to avoid making suboptimal decisions.

Accepted Answer

When market prices are unavailable or to

Question 13

The transfer price creates revenues for the selling subunit and costs for the buying subunit affecting each subunit's operating income.

Accepted Answer

A) True 
 B)False

Question 14

Nig Car Company manufactures automobiles.The Fastback Car Division sells its cars for $50,000 each to the general public.The fastback cars have manufacturing costs of $30,000 each for variable and $15,000 each for fixed costs.The division's total fixed manufacturing costs are $75,000,000 at the normal volume of 5,000 units.
The Coupe Car Division has been unable to meet the demand for its cars this year.It has offered to buy 1,000 cars from the Fastback Car Division at the full cost of $40,000.The Fastback Car Division has excess capacity and the 1,000 units can be produced without interfering with the current outside sales of 5,000.The 6,000 volume is within the division's relevant operating range.
Explain whether the Fastback Car Division should accept the offer.

Accepted Answer

@#IMG-DLM& The proposal should be accepted because

Question 15

Super Shoes Company manufactures sneakers.The Athletic Division sells its socks for $18 a pair to outsiders.Sneakers have manufacturing costs of $6.00 each for variable and $6.00 for fixed.The division's total fixed manufacturing costs are $315,000 at the normal volume of 70,000 units.
The European Division has offered to buy 15,000 Sneakers at the full cost of $12.The Athletic Division has excess capacity and the 15,000 units 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

@#IMG-DLM& The proposal should be accept

Question 16

What is decentralization and what are its benefits?

Accepted Answer

Decentralization is an organizational st

Question 17

Soft Cushion Company is highly decentralized.Each division is empowered to make its own sales decisions.The Assembly Division can purchase stuffing,a key component,from the Production Division or from external suppliers.The Production Division has been the major supplier of stuffing in recent years.The Assembly Division has announced that two external suppliers will be used to purchase the stuffing at $20 per pound for the next year.The Production Division recently increased its unit price to $40.The manager of the Production Division presented the following information - variable cost $32 and fixed cost $8 -to top management in order to attempt to force the Assembly Division to purchase the stuffing internally.The Assembly Division purchases 20,000 pounds of stuffing per month. What would be the monthly operating advantage (disadvantage)of purchasing the goods internally,assuming the external supplier increased its price to $50 per pound and the Production Division is able to utilize the facilities for other operations,resulting in a monthly cash-operating savings of $30 per pound?

Accepted Answer

A)  $1,000,000 
B)  $360,000 
C)  $(240,000) 
D)  $(400,000) 
A)  $1,000,000 
B)  $360,000 
C)  $(240,000) 
D)  $(400,000)

Question 18

Answer the following questions using the information below:
Branded Shoe Company manufactures only one type of shoe and has two divisions, the Stitching Division and the Polishing Division. The Stitching Division manufactures shoes for the Polishing Division, which completes the shoe and sells it to retailers. The Stitching Division "sells"shoes to the Polishing Division. The market price for the Polishing Division to purchase a pair of shoes is $42. (Ignore changes in inventory.) The fixed costs for the Stitching Division are assumed to be the same over the range of 40,000-100,000 units. The fixed costs for the Polishing Division are assumed to be $14 per pair at 100,000 units.
 Stitching's costs per pair of soles are:
$\begin{array} { l l } \text { Direct materials } & \$ 10 \ \text { Direct labor } & \$ 8 \ \text { Variable overhead } & \$ 6 \ \text { Division fixed costs } & \$ 4 \end{array}$
Polishing's costs per completed pair of shoes are:
$\begin{array} { l l } \text { Direct materials } & \$ 14 \ \text { Direct labor } & \$ 6 \ \text { Variable overhead } & \$ 4 \ \text { Division fixed costs } & \$ 16 \end{array}$
-What is the transfer price per pair of shoes from the Stitching Division to the Polishing Division if the transfer price per pair of soles is 125% of full costs?

Accepted Answer

A)  $12.50 
B)  $22.50 
C)  $30.00 
D)  $35.00 
A)  $12.50 
B)  $22.50 
C)  $30.00 
D)  $35.00

Question 19

Match between columns
                        Premises: On-time delivery of gasoline from refineries to retail stations
Customer satisfaction
Common stock price
Return on investment
Market share
Number of days lost to accidents
Employee satisfaction
Friendliness of employees
Repeat purchases
Cash flow from operations

Accepted Answer

The Answer of Financial and Customer and Internal Business Process is...

Question 20

Which of the following is 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 and maximizing net income. 
C)  It helps individuals throughout the organization to act independently and maximize the profitability of their departments. 
D)  It deals with coordinating planning across the organization and is not concerned with behavioral aspects of management like employee motivation. 
A)  It aids and coordinates the process of making decisions. 
B)  It encourages short-term profitability and maximizing net income. 
C)  It helps individuals throughout the organization to act independently and maximize the profitability of their departments. 
D)  It deals with coordinating planning across the organization and is not concerned with behavioral aspects of management like employee motivation.

Which of the following is a drawback of decentralizing a multinational company?

An organization should design its management control system independently of its strategies,so that the system is not affected by change of strategies in future.

Transfer-pricing systems enable managers to focus on maximizing the performance of their subunits.

Which of the following markets is said to exist when there is a homogeneous product with many sellers?

Goal congruence exists when individuals work toward achieving one goal,and groups work toward achieving a different goal.

Decentralization in multinational companies may lead to lack of control.

In the context of transfer pricing,which of the following represents the maximum contribution margin forgone by the selling subunit if the product or service is transferred internally?

When cost-based transfer pricing is used between subunits of a large organization,describe how to avoid making suboptimal decisions.

The transfer price creates revenues for the selling subunit and costs for the buying subunit affecting each subunit's operating income.

What is decentralization and what are its benefits?

Which of the following is a characteristic of a management control system?

The Manager and Management Accounting

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

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

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 and Time

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

Capital Budgeting and Cost Analysis

Performance Measurement, compensation, and Multinational Considerations

Filters

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

Which of the following is a drawback of decentralizing a multinational company?

An organization should design its management control system independently of its strategies,so that the system is not affected by change of strategies in future.

Transfer-pricing systems enable managers to focus on maximizing the performance of their subunits.

Which of the following markets is said to exist when there is a homogeneous product with many sellers?

Goal congruence exists when individuals work toward achieving one goal,and groups work toward achieving a different goal.

Decentralization in multinational companies may lead to lack of control.

In the context of transfer pricing,which of the following represents the maximum contribution margin forgone by the selling subunit if the product or service is transferred internally?

When cost-based transfer pricing is used between subunits of a large organization,describe how to avoid making suboptimal decisions.

The transfer price creates revenues for the selling subunit and costs for the buying subunit affecting each subunit's operating income.

What is decentralization and what are its benefits?

Which of the following is a characteristic of a management control system?

The Manager and Management Accounting

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

Strategy, balanced Scorecard, and Strategic Profitability Analysis

Pricing Decisions and Cost Management

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 and Time

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

Capital Budgeting and Cost Analysis

Performance Measurement, compensation, and Multinational Considerations

Filters