Multiple Chioce Quiz on Transfer Pricing

Multiple choice questions Try the multiple choice questions below to test your knowledge of Chapter 18. Once you have completed the test, click on 'Submit Answers for Grading' to get your results. If your lecturer has requested that you send your results to them, please complete the Routing Information found at the bottom of your graded page and click on the 'E-Mail Results' button. Please do not forward your results unless your lecturer has specifically requested that you do so. This activity contains 10 questions. ------------------------------------------------- Top of Form | | | | |

When a perfectly competitive market exists and the firm uses market-based transfer pricing, the firm can achieve all of the following except for:| | | |   | subunit performance evaluation. | | management effort. | | goal congruence. | | price monopoly. | | | | | | | | | | | | Bob is the manager of the Beta division. He is accountable for only the sales generated by the division. Beta is a(n):| | | |   | cost centre. | | profit centre. | | investment centre. | | revenue centre. | | | | | | | | | | | | A company that uses a separate transfer price for each division in a single transaction is employing:| | |   | dual pricing. | | market-based pricing. | | negotiated pricing. | | full cost pricing. | | | | | | | | | | | | If the selling subunit is operating at full capacity and can sell everything produced either internally or externally, it will only be willing to use a transfer price set by:| | | |   | cost plus a mark-up. | | the market. | | negotiation. | | variable costing. | | | | | | | | | | | | Optoca has 2 divisions, A and B. A makes a component for tables which it can sell only to Division B. It has no other outlet for sales.

Current information for the divisions is as follows: Incremental cost for Division A| €100| Incremental cost for Division B| €200| Transfer price for component| €175| Final Table selling price| €425| The transfer price is based on 175% of incremental costs. What is the profit per table for Optoca? | | | |   | €50| | €75| | €150| | €125| | | | | | | | | | | | Optoca has 2 divisions, A and B. A makes a component for tables which it can sell only to Division B. It has no other outlet for sales. Current information for the divisions is as follows: Incremental cost for Division A| €100| Incremental cost for Division B| €200|

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Transfer price for component| €175| Final Table selling price| €425| Unit sales| 300| The transfer price is based on 175% of incremental costs. What is the amount of profit recognized by Division B? | | | |   | €15,000| | €45,000| | €22,500| | €37,500| | | | | | | | | | | | Optoca has 2 divisions, A and B. A makes a component for tables which it can sell only to Division B. It has no other outlet for sales. Current information for the divisions is as follows: Incremental cost for Division A| €100| Incremental cost for Division B| €200| Transfer price for component| €175|

Final Table selling price| €425| The transfer price is based on 175% of incremental costs. Acotpo has offered to sell Division B the same component it currently gets from Division A for €150 per unit. If Division B accepts Acotpo’s offer, the firm as a whole will be:| | | |   | €25 per unit worse off. | | €25 per unit better off. | | €50 per unit better off. | | €50 per unit worse off. | | | | | | | | | | | | Optoca has 2 divisions, A and B. A makes a component for tables which it can sell only to Division B. It has no other outlet for sales.

Current information for the divisions is as follows: Incremental cost for Division A| €100| Incremental cost for Division B| €200| Transfer price for component| €175| Final Table selling price| €425| The transfer price is based on 175% of incremental costs. Acotpo has offered to sell Division B the same component it currently gets from Division A for €150 per unit. Given this information, what is the minimum amount that Division A would be willing to sell to Division B? | | | |   | €100 per unit. | | €150 per unit. | | €125 per unit. | | €175 per unit. | | | | | | | | | | | If Minnico, which uses cost based transfer pricing, finds that Division A has costs of €100 per unit, and Division B has divisional costs of €125 per unit, what will Division B recognise as total cost per unit if the mark-up rate is 40%? | | | |   | €100 per unit. | | €265 per unit. | | €225 per unit. | | €140 per unit. | | | | | | | | | | | | Which transfer pricing method will preserve the subunit autonomy? | | | |   | Cost-based pricing. | | Negotiated pricing. | | Full-cost pricing. | | Variable-cost pricing. | | | | | | | Bottom of Form

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