Question 1

The additional cost of producing and transferring the product or service is called variable manufacturing cost.

Accepted Answer

A) True 
 B)False  False

Question 2

Which of the following would be considered an example of an element of an informal control system?

Accepted Answer

A) procedures developed by first level managers to help guide staff in their daily work 
B) a policy that requires all employees to take at least two weeks of vacation each year 
C) Shared values within an organization's culture 
D) the master budget 
A) procedures developed by first level managers to help guide staff in their daily work 
B) a policy that requires all employees to take at least two weeks of vacation each year 
C) Shared values within an organization's culture 
D) the master budget C

Question 3

One advantage of prorating the difference between a maximum and minimum transfer price of a product to be moved between divisions is that it saves the cost of objective audits of transfer pricing.

Accepted Answer

A) True 
 B)False  False

Question 4

Which of the following is an advantage of decentralization?

Accepted Answer

A) It assists management development and learning. 
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 assists management development and learning. 
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 5

How does cost-based transfer price method help managers to determine transfer prices?

Accepted Answer

Managers may choose a transfer price bas

Question 6

The labels profit center and cost center are dependent on the degree of centralization or decentralization in a company.

Accepted Answer

A) True 
 B)False

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

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&_TB5540_00_TB5540_00 The proposal should

Question 9

Decisions regarding sources of long-term financing are best made at subunit level as the subunit has local knowledge and can leverage it in negotiations.

Accepted Answer

A) True 
 B)False

Question 10

Timekeeper Corporation has two divisions,Distribution and Manufacturing.The company's primary product is high-end watches.Each division's costs are provided below:
 
The Distribution Division has been operating at a capacity of 4,009,000 units a week and usually purchases 2,004,500 units from the Manufacturing Division and 2,004,500 units from other suppliers at $10.00 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 watch is 170% of variable costs?

Accepted Answer

A) $1.87 
B) $3.18 
C) $3.19 
D) $8.13 
A) $1.87 
B) $3.18 
C) $3.19 
D) $8.13

Question 11

Decentralization in multinational companies may lead to lack of control.

Accepted Answer

A) True 
 B)False

Question 12

When using transfer prices based on costs rather than market prices,management can better determine profitability of the investment made in the intermediate producing division.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is true about transfer pricing?

Accepted Answer

A) The maximum price that the buying division is willing to pay is the higher of the eventual contribution generated from an internal transaction and the price of purchasing from an external party 
B) The selling division must always set a transfer price above the market price of the product to make the transaction economically feasible for the buying division. 
C) There is generally a minimum transfer price the selling division will not go below based on its own cost structure. 
D) The transfer-price range lies between the its fixed cost per unit and the higher of its contribution or price at which the product is available from external suppliers 
A) The maximum price that the buying division is willing to pay is the higher of the eventual contribution generated from an internal transaction and the price of purchasing from an external party 
B) The selling division must always set a transfer price above the market price of the product to make the transaction economically feasible for the buying division. 
C) There is generally a minimum transfer price the selling division will not go below based on its own cost structure. 
D) The transfer-price range lies between the its fixed cost per unit and the higher of its contribution or price at which the product is available from external suppliers

Question 14

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 15

The management accounting system is an informal management control system which provide information about the firm's costs,revenues,and income.

Accepted Answer

A) True 
 B)False

Question 16

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

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

An investment center is always a decentralized subunit.

Accepted Answer

A) True 
 B)False

Question 19

The human resources systems is a part of the formal management control systems of an organization.

Accepted Answer

A) True 
 B)False

Question 20

________ occurs when a decision's benefits for one subunit is more than offset by the costs to the organization as a whole.

Accepted Answer

A) Suboptimal decision making 
B) Independent decision making 
C) Congruent decision making 
D) Departmental decision making 
A) Suboptimal decision making 
B) Independent decision making 
C) Congruent decision making 
D) Departmental decision making

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

The additional cost of producing and transferring the product or service is called variable manufacturing cost.

Which of the following would be considered an example of an element of an informal control system?

One advantage of prorating the difference between a maximum and minimum transfer price of a product to be moved between divisions is that it saves the cost of objective audits of transfer pricing.

Which of the following is an advantage of decentralization?

How does cost-based transfer price method help managers to determine transfer prices?

The labels profit center and cost center are dependent on the degree of centralization or decentralization in a company.

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

Decisions regarding sources of long-term financing are best made at subunit level as the subunit has local knowledge and can leverage it in negotiations.

Decentralization in multinational companies may lead to lack of control.

When using transfer prices based on costs rather than market prices,management can better determine profitability of the investment made in the intermediate producing division.

Which of the following is true about transfer pricing?

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

The management accounting system is an informal management control system which provide information about the firm's costs,revenues,and income.

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

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 ________.

An investment center is always a decentralized subunit.

The human resources systems is a part of the formal management control systems of an organization.

________ occurs when a decision's benefits for one subunit is more than offset by the costs to the organization as a whole.

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

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