Question 1

Which of the following is an advantage of decentralization?

Accepted Answer

A)  It creates greater responsiveness to local needs. 
B)  It focuses managers' attention on the organization as a whole. 
C)  It does not result in a duplication of activities. 
D)  It encourages suboptimal decision making. 
A)  It creates greater responsiveness to local needs. 
B)  It focuses managers' attention on the organization as a whole. 
C)  It does not result in a duplication of activities. 
D)  It encourages suboptimal decision making.

Question 2

An investment center is always a decentralized subunit.

Accepted Answer

A) True 
 B)False

Question 3

A well-designed management control system uses information from ________.

Accepted Answer

A)  internal sources only as they are the most reliable sources of information 
B)  external sources only as they are more dynamic and future oriented 
C)  both internal and external sources as a wide range of information is required 
D)  external sources only as they are the most reliable sources of information 
A)  internal sources only as they are the most reliable sources of information 
B)  external sources only as they are more dynamic and future oriented 
C)  both internal and external sources as a wide range of information is required 
D)  external sources only as they are the most reliable sources of information

Question 4

Crush 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 Illinois who is willing to sell 40,000 containers at $30 each,delivered to Crush Company's Shipping Division in Missouri.The company's Shipping Division in Missouri 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 Illinois supplier and shipping it to the Soda Division?

Accepted Answer

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

Question 5

Management control systems is designed only for top level managers and is not applicable to line managers.

Accepted Answer

A) True 
 B)False

Question 6

________,in the perspective of an effective management control,is the extent to which managers strive or endeavor in order to achieve a goal.

Accepted Answer

A)  Efficiency 
B)  Effectiveness 
C)  Effort 
D)  Variance 
A)  Efficiency 
B)  Effectiveness 
C)  Effort 
D)  Variance

Question 7

The tariffs and customs duties governments levy on imports of products into a country also affect the transfer pricing practices of multinationals.

Accepted Answer

A) True 
 B)False

Question 8

What does Section 482 of the U.S.Internal Revenue Code govern?

Accepted Answer

Section 482 of the U.S.Internal Revenue

Question 9

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 market-based transfer price per pair of shoes from the Stitching Division to the Polishing Division?

Accepted Answer

A)  $20 
B)  $32 
C)  $42 
D)  $52 
A)  $20 
B)  $32 
C)  $42 
D)  $52

Question 10

The product or service transferred between subunits of an organization is called an intermediate product.

Accepted Answer

A) True 
 B)False

Question 11

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 12

If the distress price is used as the transfer price,________.

Accepted Answer

A)  the selling division will show a loss because the distress price will not exceed the full cost of the division 
B)  the buying division will show a loss because the distress price will not exceed the full cost of the division 
C)  the selling division will show a loss because the distress price will exceed the full cost of the division 
D)  the buying division will show a loss because the distress price will exceed the full cost of the division 
A)  the selling division will show a loss because the distress price will not exceed the full cost of the division 
B)  the buying division will show a loss because the distress price will not exceed the full cost of the division 
C)  the selling division will show a loss because the distress price will exceed the full cost of the division 
D)  the buying division will show a loss because the distress price will exceed the full cost of the division

Question 13

Which of the following is a part of the formal management control system?

Accepted Answer

A)  mutual commitments among the members of the organization 
B)  the quality system which provides information about defective products 
C)  shared values and loyalties among the members of the organization 
D)  general understanding about acceptable behavior for managers 
A)  mutual commitments among the members of the organization 
B)  the quality system which provides information about defective products 
C)  shared values and loyalties among the members of the organization 
D)  general understanding about acceptable behavior for managers

Question 14

The seller of a product has no idle capacity and can sell all it can produce at $39 per unit.Outlay cost is $9.What is the opportunity cost,assuming the seller sells internally?

Accepted Answer

A)  $9 
B)  $30 
C)  $39 
D)  $48 
A)  $9 
B)  $30 
C)  $39 
D)  $48

Question 15

Cornerstone Company has two divisions.The Bottle Division produces products that have variable costs of $3 per unit.Its 20X5 sales were 140,000 to outsiders at $5 per unit and 40,000 units to the Mixing Division at 140% of variable costs.Under a dual transfer-pricing system,the Mixing Division pays only the variable cost per unit.The fixed costs of the Bottle Division are $125,000 per year.
Mixing sells its finished products to outside customers for $11.50 per unit.Mixing has variable costs of $2.50 per unit in addition to the costs from the Bottle Division.The annual fixed costs of Mixing were $85,000.There were no beginning or ending inventories during the year.
Required:
What are the operating incomes of the two divisions and the company as a whole for the year? Explain why the company's operating income is less than the sum of the two divisions' total income.

Accepted Answer

@#IMG-DLM& * 40,000 × $3 × 1.40 = $168,0

Question 16

Which of the following is true of transfer pricing?

Accepted Answer

A)  It creates costs for the selling subunit. 
B)  It creates revenues for the buying subunit. 
C)  It helps top managers evaluate the performance of individual subunits. 
D)  It makes managers' information-processing and decision-making tasks difficult. 
A)  It creates costs for the selling subunit. 
B)  It creates revenues for the buying subunit. 
C)  It helps top managers evaluate the performance of individual subunits. 
D)  It makes managers' information-processing and decision-making tasks difficult.

Question 17

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)  simplicity of its computations and close approximation to market price 
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)  simplicity of its computations and close approximation to market price

Question 18

Dual pricing insulates managers from the realities of the marketplace because costs,not market prices,affect the revenues of the supplying division.

Accepted Answer

A) True 
 B)False

Question 19

Briefly explain each of the three methods used to determine a transfer price.

Accepted Answer

Transfer prices can be calculated using

Question 20

Companies have an incentive to lower the transfer prices of products they are exporting into a country to reduce the tariffs and customs duties charged on those products.

Accepted Answer

A) True 
 B)False

Which of the following is an advantage of decentralization?

An investment center is always a decentralized subunit.

A well-designed management control system uses information from ________.

Management control systems is designed only for top level managers and is not applicable to line managers.

________,in the perspective of an effective management control,is the extent to which managers strive or endeavor in order to achieve a goal.

The tariffs and customs duties governments levy on imports of products into a country also affect the transfer pricing practices of multinationals.

What does Section 482 of the U.S.Internal Revenue Code govern?

The product or service transferred between subunits of an organization is called an intermediate product.

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 ________.

If the distress price is used as the transfer price,________.

Which of the following is a part of the formal management control system?

The seller of a product has no idle capacity and can sell all it can produce at $39 per unit.Outlay cost is $9.What is the opportunity cost,assuming the seller sells internally?

Which of the following is true of transfer pricing?

An advantage of a negotiated transfer price is the ________.

Dual pricing insulates managers from the realities of the marketplace because costs,not market prices,affect the revenues of the supplying division.

Briefly explain each of the three methods used to determine a transfer price.

Companies have an incentive to lower the transfer prices of products they are exporting into a country to reduce the tariffs and customs duties charged on those products.

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 an advantage of decentralization?

An investment center is always a decentralized subunit.

A well-designed management control system uses information from ________.

Management control systems is designed only for top level managers and is not applicable to line managers.

________,in the perspective of an effective management control,is the extent to which managers strive or endeavor in order to achieve a goal.

The tariffs and customs duties governments levy on imports of products into a country also affect the transfer pricing practices of multinationals.

What does Section 482 of the U.S.Internal Revenue Code govern?

The product or service transferred between subunits of an organization is called an intermediate product.

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 ________.

If the distress price is used as the transfer price,________.

Which of the following is a part of the formal management control system?

The seller of a product has no idle capacity and can sell all it can produce at $39 per unit.Outlay cost is $9.What is the opportunity cost,assuming the seller sells internally?

Which of the following is true of transfer pricing?

An advantage of a negotiated transfer price is the ________.

Dual pricing insulates managers from the realities of the marketplace because costs,not market prices,affect the revenues of the supplying division.

Briefly explain each of the three methods used to determine a transfer price.

Companies have an incentive to lower the transfer prices of products they are exporting into a country to reduce the tariffs and customs duties charged on those products.

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