Question :
41)
Division A sells soybean paste internally to Division B, which, : 1196206
41)
Division A sells soybean paste internally to Division B, which, in turn, produces soybean burgers that sell for $5 per kilogram. Division A incurs costs of $0.75 per kilogram, while Division B incurs additional costs of $2.50 per kilogram.
Which of the following formulas correctly reflects the company’s operating income? 41)
______ A)
$5.00 – ($0.25 +$1.25 +$1.50) =$2.00 B)
$5.00 – ($0.25 +$1.25 +$3.50) = 0 C)
$5.00 – ($1.25 +$2.50) =$1.25 D)
$5.00 – ($0.75 +$3.75) =$0.50 E)
$5.00 – ($0.75 +$2.50) =$1.75
42)
A market is said to be perfectly-competitive when 42)
______ A)
there are any number of products, equivalent buying and selling prices, and individual buyers or sellers can affect those prices by their own actions. B)
there is no opportunity costs incurred by the vendor nor by the buyer. C)
there are any number of products, equivalent buying and selling prices, and individual buyers or sellers can affect those prices by their own actions, but there are no opportunity costs for buyers or sellers. D)
the market may be dominated by one or two major companies, but there are many smaller companies also in the market. E)
there is a homogeneous product, equivalent buying and selling prices, and no individual buyers or sellers can affect those prices by their own actions.
43)
Under what conditions would transferring products or services at market prices lead to optimal decisions within the organization? 43)
______ A)
when the immediate market is only somewhat competitive and there is excess capacity B)
when there is minimal interdependence between subunit divisions C)
when the immediate market is a monopoly D)
when the immediate market is not a monopoly, and there is minimal interdependence between subunit divisions E)
when there is excess capacity
44)
In a time of distress prices, which of the following is TRUE? 44)
______ A)
in the short-term, the transfer price should be the distress price as long as this exceeds the incremental costs B)
the distress price should be ignored as it is a function of the market, not of the internal capacities of the overall company C)
the purchasing division should pay normal prices D)
the vendor division should set the transfer price at the distress price on a long-term basis for stability within the overall company E)
the vendor division should cease production
45)
When industry has excess capacity, market prices may drop sizably below their historical average. If this drop is temporary, it is called 45)
______ A)
fire sale. B)
low-average prices. C)
distress prices. D)
dropped prices. E)
substitute prices.
46)
Many companies do not want to use market prices, or find it too costly, and they use ________ prices, even though sub optimal decisions may occur. 46)
______ A)
long-run cost B)
short-run average cost C)
average-cost D)
variable cost E)
full-cost
47)
Crush Company makes internal transfers at 180% of full cost. The Soda Refining division purchases 30,000 containers of carbonated water per day, on average, from a local supplier, who delivers the water for$30 per container via an external shipper. In order to reduce costs the company located an independent producer in Manitoba who is willing to sell 30,000 containers at$20 each, delivered to Crush Company’s shipping division in Manitoba. The company’s Shipping Division in Manitoba has excess capacity and can ship the 30,000 containers at a variable cost of$2.50 per container.
What is the total cost to Crush Company if the carbonated water is purchased from the local supplier? 47)
______ A)
$1,620,000 B)
$900,000 C)
$1,501,000 D)
$1,200,000 E)
$1,721,150
48)
Crush Company makes internal transfers at 180% of full cost. The Soda Refining division purchases 30,000 containers of carbonated water per day, on average, from a local supplier, who delivers the water for$30 per container via an external shipper. In order to reduce costs the company located an independent producer in Manitoba who is willing to sell 30,000 containers at$20 each, delivered to Crush Company’s shipping division in Manitoba. The company’s Shipping Division in Manitoba has excess capacity and can ship the 30,000 containers at a variable cost of$2.50 per container.
What is the total cost of purchasing the water from the Manitoba supplier and shipping it to the Soda Division? 48)
______ A)
$1,080,000 B)
$1,215,000 C)
$600,000 D)
$675,000 E)
$1,815,000
49)
One reason companies use full-cost transfer pricing is that it provides 49)
______ A)
relevant costs for long-run decisions and for employee staffing decisions. B)
relevant costs for long-run decisions even though poor short-run decisions may result. C)
relevant costs for short-run decisions and poor for long-run decisions. D)
relevant costs for long-run decisions and for short-run decisions. E)
relevant costs for short-run decisions at the expense of the company.
50)
When companies are unable to choose a transfer-pricing method which meets their requirements, they may use 50)
______ A)
pro-rating pricing. B)
cost pricing. C)
market pricing. D)
situational pricing. E)
dual pricing.
51)
When the vendor division receives full cost plus a mark-up, and the buying division pays the market price, this is referred to as
