Question : Objective 22.4 1) Negotiated transfer prices often employed when ________. A) market : 1212015

 

Objective 22.4

 

1) Negotiated transfer prices are often employed when ________.

A) market prices are stable

B) market prices are volatile

C) market prices change by a regular percentage each year

D) goal congruence is not a major objective

 

2) The costs used in cost-based transfer prices ________.

A) are actual costs

B) are budgeted costs

C) can either be actual or budgeted costs

D) are lower than the market-based transfer prices

 

3) Which of the following is true of hybrid transfer prices?

A) The cost used in hybrid transfer prices is always the actual cost.

B) The cost used in hybrid transfer prices is always the budgeted cost.

C) They take into account both cost and market information.

D) They are less popular in manufacturing industry.

4) To reduce the excessive focus of subunit managers on their own subunits, many companies compensate subunit managers on the basis of ________.

A) both the operating income earned by their respective subunits and the company as a whole

B) both the investing income earned by their respective subunits and the company as a whole

C) only the investing income earned by their respective subunits

D) both the net income and earned by their respective subunits and the company as a whole

 

Answer the following questions using the information below:

 

Axelia Corporation has two divisions, Refining and Extraction. The company’s primary product is Luboil Oil. Each division’s costs are provided below:

 

Extraction:Variable costs per barrel of oil$  7

Fixed costs per barrel of oil$  5

Refining:Variable costs per barrel of oil$28

Fixed costs per barrel of oil$32

 

The Refining Division has been operating at a capacity of 40,000 barrels a day and usually purchases 25,000 barrels of oil from the Extraction Division and 15,000 barrels from other suppliers at $60 per barrel.

 

5) What is the transfer price per barrel from the Extraction Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 180% of variable costs?

A) $12.60

B) $21.60

C) $72.00

D) $130.00

 

6) What is the transfer price per barrel from the Extraction  Division to the Refining Division, assuming the method used to place a value on each barrel of oil is 110% of full costs?

A) $12.00

B) $13.20

C) $44.00

D) $79.00

7) Assume 200 barrels are transferred from the Extraction Division to the Refining Division for a transfer price of $18 per barrel. The Refining Division sells the 200 barrels at a price of $120 each to customers. What is the operating income of both divisions together?

A) $7,200

B) $9,600

C) $10,800

D) $20,400

 

Answer the following questions using the information below:

 

Timekeeper Corporation has two divisions, Distribution and Manufacturing. The company’s primary product is high-end watches. Each division’s costs are provided below:

 

Manufacturing:Variable costs per unit$1.00

Fixed costs per unit$5.00

Distribution:Variable costs per unit$0.60

Fixed costs per unit$0.40

 

The Distribution Division has been operating at a capacity of 4,000,000 units a week and usually purchases 2,000,000 units from the Manufacturing Division and 2,000,000 units from other suppliers at $9.00 per unit.

 

8) What is the transfer price per watch from the Manufacturing Division to the Distribution Division, assuming the method used to place a value on each pound of fertilizer is 160% of variable costs?

A) $1.00

B) $1.60

C) $2.20

D) $8.00

 

9) What is the transfer price per watch  from the Manufacturing Division to the Distribution Division, assuming the method used to place a value on each transfer is 120% of full costs?

A) $6.00

B) $7.20

C) $9.00

D) $11.00

10) Assume 100,000 pounds are transferred from the Manufacturing Division to the Distribution Division for a transfer price of $8.00 per pound. The Distribution Division sells the 100,000 pounds at a price of $11.00 each to customers. What is the operating income of both divisions together?

A) $200,000

B) $300,000

C) $400,000

D) $500,000