MN551 MOST EXAMINED
QUESTIONS AND ANSWERS
the key disadvantage of using full cost as the transfer price is it
may result in improper (suboptimal) decision-making
key advantages of the market value method for transfer-price
determination include
it satisfies the arms length transaction criterion preferred by the
IRS and objectivity
when there is no external supplier, the best transfer price is
based on
cost or negotiated price
the primary objectives for transfer prices are to
motivate managers to put forth a high level of effort
achieve goal congruence
reward managers fairly for their decisions
the amount calculated using the general rule for transfer
pricing represents the _____ amount the selling division
should accept for an internal transfer
minimum
, the process of determining the dollar amount of an exchange
of a product or service transferred internally within different
business units of an organization is called
transfer pricing
the arms length estimate for a transfer price that is equal to
the selling prices charged for similar products by unrelated
firms is referred to as the
comparable-price method
when using the variable-cost method of transfer pricing
either actual cost or standard cost can be used
a mark-up for profit may or may not be included
a key disadvantage of using market price as the transfer price
for internal transfers is
market price might not exist for intermediate products
the term goal congruency, within the context of transfer-
pricing decision, refers to the extent to which the chosen
transfer price
motivates decisions on the part of divisional managers that are
consistent with top management's goals
the transfer price method that sometimes involves arbitration
in order to arrive at a final transfer price is the
negotiated-price method
QUESTIONS AND ANSWERS
the key disadvantage of using full cost as the transfer price is it
may result in improper (suboptimal) decision-making
key advantages of the market value method for transfer-price
determination include
it satisfies the arms length transaction criterion preferred by the
IRS and objectivity
when there is no external supplier, the best transfer price is
based on
cost or negotiated price
the primary objectives for transfer prices are to
motivate managers to put forth a high level of effort
achieve goal congruence
reward managers fairly for their decisions
the amount calculated using the general rule for transfer
pricing represents the _____ amount the selling division
should accept for an internal transfer
minimum
, the process of determining the dollar amount of an exchange
of a product or service transferred internally within different
business units of an organization is called
transfer pricing
the arms length estimate for a transfer price that is equal to
the selling prices charged for similar products by unrelated
firms is referred to as the
comparable-price method
when using the variable-cost method of transfer pricing
either actual cost or standard cost can be used
a mark-up for profit may or may not be included
a key disadvantage of using market price as the transfer price
for internal transfers is
market price might not exist for intermediate products
the term goal congruency, within the context of transfer-
pricing decision, refers to the extent to which the chosen
transfer price
motivates decisions on the part of divisional managers that are
consistent with top management's goals
the transfer price method that sometimes involves arbitration
in order to arrive at a final transfer price is the
negotiated-price method
