Question : 11) A product may be passed from one subunit to : 1186221

 

11) A product may be passed from one subunit to another subunit in the same organization. The product is known as

A) an interdepartmental product.

B) an intermediate product.

C) a subunit product.

D) a transfer product.

E) a secondary product.

12) The price one subunit of an organization charges for a product or service supplied to another subunit of the same organization is called

A) an interdepartmental product price.

B) an intermediate product price.

C) a subunit price.

D) a transfer price.

E) a fixed price.

 

13) All of the following criteria may be used to choose a transfer-pricing method EXCEPT

A) promotion of quality products.

B) promotion of a sustained high level of management effort.

C) promotion of a high level of subunit autonomy.

D) promotion of goal congruence.

E) promotion of optimal decision making.

 

14) All of the following are appropriate methods for determining transfer prices EXCEPT

A) cost-based transfer prices.

B) market-based transfer prices.

C) negotiated transfer prices.

D) taxation policies.

E) cost based transfer prices at 110% of full cost.

 

15) A transfer pricing method should lead to which of the following results?

A) managers always acting in their own best interest

B) managers acting in their own best interest and their decisions being in the long-term best interest of the manager’s subunit

C) managers acting in their own best interest and their decisions being in the long-term best interest of the company

D) managers acting in their own best interest and their decisions being in the short-term best interest of the company

E) managers competing with each other

 

16) Subunits X and Y determined the price for interdepartmental services during the last monthly meeting, using the selling prices charged to outside parties. This is an example of

A) subunit transfer prices.

B) negotiated transfer prices.

C) market-based transfer prices.

D) cost-based transfer prices.

E) multinational transfer pricing.

 

Use the information below to answer the following question(s).

 

Blackoil Corp. has two divisions, Refining and Production. The company’s primary product is Clean Oil. Each division’s costs are provided below:

 

Refining:

Variable costs per litre of oil

$30

 

Fixed costs per litre of oil

$24

 

 

 

Production:

Variable costs per litre of oil

$6

 

Fixed costs per litre of oil

$4

 

The Production Division is able to sell the oil to other areas for $24 per litre. The Refining Division has been operating at a capacity of 80,000 litres a day, using oil from the Production Division and oil purchased from other suppliers. The Refining Division usually purchases 50,000 litres of oil, on average, from the Production Division and 30,000 litres, on average, from other suppliers at $40/litre.

 

17) What is the transfer price per litre assuming the method used is 175% of variable costs?

A) $10.50

B) $12.00

C) $17.50

D) $24.50

E) $12.50

 

18) What is the transfer price per litre from the Production Division to the Refining Division assuming the method is 120% of full costs?

A) $16.80

B) $12.00

C) $9.50

D) $7.20

E) $12.50

19) What is the transfer price per litre from production to refining if the market price method of pricing is used?

A) $24

B) $32

C) $36

D) $40

E) $38

 

20) What is the Production Division’s operating income per 200 litres of oil reported under the 175% of variable costs method?

A) $1,500

B) $880

C) $100

D) $(100)

E) $1,200

 

 

 

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