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

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.

One concern with dual pricing is that it leads to disputes about which price should be used when computing the taxable income of subunits located in different tax jurisdictions.

One of the problems in using one set of accounting records for tax reporting and another set of records for internal management reporting is that ________.

Bedtime Bedding Company manufactures pillows.The Cover Division makes covers and the Assembly Division makes the finished products.The covers can be sold separately for $5.00.The pillows sell for $6.00.The information related to manufacturing for the most recent year is as follows: Cover Division manufacturing costs \ 6,000,000 Sales of covers by Cover Division 4,000,000 Market value of covers transferred to Assembly 6,000,000 Sales of pillows by Assembly Division 7,200,000 Additional manufacturing costs of Assembly Division 1,500,000 Required: Compute the operating income for each division and the company as a whole.Use market value as the transfer price.Are all managers happy with this concept? Explain.

The minimum transfer price equals ________.

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

Answer the following questions using the information below: Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company's primary product is high-end watches. Each division's costs are provided below: Manufacturing: Variable costs per unit \ 1.00 Fixed costs per unit \ 5.00 Distribution: Variable costs per unit \ 0.60 Fiæed costs per unit \ 0.40 The Distribution Division has been operating at a capacity of 4,000,000 units a week and usually purchases 2,000,000 units from the Manufacturing Division and 2,000,000 units from other suppliers at $9.00 per unit. -What is the transfer price per watch from the Manufacturing Division to the Distribution Division,assuming the method used to place a value on each pound of fertilizer is 160% of variable costs?

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

If the Fabrication Division sells 1,000 air conditioners at a price of $375.00 per washing machine to customers,what is the operating income of both divisions together?

Effective management control systems should also motivate managers and other employees.

The seller of Product A has no idle capacity and can sell all it can produce at $50 per unit.Outlay cost is $12.What is the opportunity cost,assuming the seller sells internally?

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: Direct materials \ 10 Direct labor \ 8 Variable overhead \ 6 Division fixed costs \ 4 Polishing's costs per completed pair of shoes are: Direct materials \ 14 Direct labor \ 6 Variable overhead \ 4 Division fixed costs \ 16 -What is the transfer price per pair of shoes from the Stitching Division to the Polishing Division if the method used to place a value on each pair of shoes is 180% of variable costs?

Dual pricing uses two separate transfer-pricing methods to price each transfer from one subunit to another.

The transfer-pricing method that reduces the goal-congruence problems associated with a pure cost-plus-based transfer-pricing method is the ________.

Market-based transfer prices are helpful when ________.

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

Surveys indicate that decisions made most frequently at the corporate level are related to sources of supplies and products to manufacture.

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: Extraction: Variable costs per barrel of oil \ 7 Fixed costs per barrel of oil \ 5 Refining: Variable costs per barrel of oil \ 28 Fixed costs per barrel of oil \ 32 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. -What is the transfer price per barrel from the Extraction Division to the Refining Division,assuming the method used to place a value on each barrel of oil is 110% of full costs?

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

Answer the following questions using the information below: Plish Company manufactures only one type of washing machine and has two divisions, the Compressor Division, and the Fabrication Division. The Compressor Division manufactures compressors for the Fabrication Division, which completes the washing machine and sells it to retailers. The Compressor Division "sells" compressors to the Fabrication Division. The market price for the Fabrication Division to purchase a compressor is $40.00. (Ignore changes in inventory.) The fixed costs for the Compressor Division are assumed to be the same over the range of 5,000-10,000 units. The fixed costs for the Fabrication Division are assumed to be $7.50 per unit at 10,000 units. Compressor's costs per compressor are: Direct materials \ 15.00 Direct labor \ 7.25 Variable overhead \ 3.00 Division fixed costs \ 7.50 Fabrication's costs per completed air conditioner are: Direct materials \ 150.00 Direct labor \ 62.50 Variable overhead \ 20.00 Division fixed costs \ 7.50 -What is the transfer price per compressor from the Compressor Division to the Fabrication Division if the transfer price per compressor is 110% of full costs?