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

"Management control systems consist of formal and informal control systems." Briefly explain the formal and informal management systems and enlist their components.

Minimum transfer price can be arrived at by adding incremental cost per unit incurred up to the point of transfer with the markup required.

The seller of Product A has no idle capacity and can sell all it can produce at $59 per unit.Outlay cost is $20.What is the opportunity cost,assuming the seller sells internally?

Negotiated transfer prices are often employed when market prices are stable.

Dual pricing is not widely used.Explain its disadvantages.

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

Hybrid transfer prices take into account both cost and market information.

Cost-based transfer prices are helpful when markets are not perfectly competitive.

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

The Fabrication Division of American Car Company has offered to purchase 90,000 batteries from the Electrical Division for $104 per unit.At a normal volume of 250,000 batteries per year,production costs per battery are as follows: The Electrical Division has been selling 250,000 batteries per year to outside buyers at $136 each;capacity is 350,000 batteries per year.The Fabrication Division has been buying batteries from outside sources for $130 each. Required: a.Should the Electrical Division manager accept the offer? Explain. b.From the company's perspective,will the internal sales be of any benefit? Explain.

The formal management control system includes shared values,loyalties,and mutual commitments among members of the company,company culture,and norms about acceptable behavior for managers and other employees.

Both the market-based transfer pricing approach and cost-based methods are useful for evaluating subunit performance.

If a computer manufacturer used its common stock price as a Balanced Scorecard control measure,it would be utilizing which of the following?

The full cost plus a markup transfer-pricing method can sometimes lead to goal incongruence.

Which of the following helps in avoiding costly transfer-pricing disputes between taxpayers and tax authorities?

A transfer-pricing method leads to goal congruence when ________.

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

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 $60.00.(Ignore changes in inventory. )The fixed costs for the Compressor Division are assumed to be the same over the range of 13,000-18,000 units.The fixed costs for the Fabrication Division are assumed to be $7.50 per unit at 18,000 units. What is the market-based transfer price per compressor from the Compressor Division to the Fabrication Division?

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

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