Exam 10: Decentralization: Responsibility Accounting, Performance Evaluation, and Transfer Pricing

The following information pertains to the three divisions of Merrymount Company: What are the average operating assets for Division Z?

The minimum transfer price is the absolute maximum price that can be accepted.

The Engine Division provides diesel engines for the Motor Home Division of a company. The standard unit costs for Engine Division are as follows: What is the best transfer price to avoid transfer price problems?

The after-tax operating profit minus the total annual cost of capital equals the:

When there is an outside market for an intermediate product that is perfectly competitive, the most equitable method of transfer pricing is

Panther Company had the following historical accounting data per unit: The units are normally transferred internally from Division A to Division B. The units also may be sold externally for $210 per unit. The minimum profit level accepted by the company is a markup of 30 percent. There were no beginning or ending inventories. What would be the transfer price if Division X uses full cost plus markup?

When the major functions of a company are controlled by top management, it is called __________ .

Transfer prices are the prices charged

An example of an investment center is a

The transfer pricing problem concerns finding a system that simultaneously satisfies the three objectives of the transfer pricing system.

One of the reasons for decentralization is more timely response. This means

Olden Company has a tax rate of 40 percent. Information for the company is as follows: What is the weighted average cost of capital?

In the Bombadier Company, Division A has a product that can be sold either to outside customers or to Division B. Information about these divisions is given below: The company uses the opportunity cost approach to transfer pricing. What is the minimum transfer price in Case 1?

Cornwall Company has two divisions, A and B. Information for each division is as follows: What is EVA for Division A?

Which of the following is a disadvantage of both residual income and ROI?

If a company has sales of $2,500,000, net income of $250,000, and an asset base of $1,250,000, its return on investment is

Goal congruence can be defined as

The following information pertains to the three divisions of Merrymount Company: What is the margin for Division Z?

The Jet Engine Division provides engines for the Jet Plane Division of a company. The standard unit costs for the Jet Engine Division are as follows: The engine department has excess capacity. What is the best transfer price to avoid transfer price problems?

Decentralization stimulates competition among the divisions of a firm.