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Division a sells soybean paste internally to division b
Course:- Accounting Basics
Reference No.:- EM13601433




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1. Major influences of competitors, costs, and customers on pricing decisions are factors of

  • supply and demand.
  • activity-based costing and activity-based management.
  • key management themes that are important to managers attaining success in their planning and control decisions.
  • the value-chain concept.

2. The best opportunity for cost reduction is

  • during the manufacturing phase of the value chain.
  • during the product-process design phase of the value chain.
  • during the marketing phase of the value chain.
  • during the distribution phase of the value chain.

3. A product's markup percentage needs to cover operating profits when the cost base is

  • variable manufacturing costs.
  • the full cost of the product.
  • the variable cost of the product.
  • All of the above

4. Life-cycle costing is the name given to

  • a method of cost planning to reduce manufacturing costs to targeted levels.
  • the process of examining each component of a product to determine whether its cost can be reduced.
  • the process of managing all costs along the value chain.
  • a system that focuses on reducing costs during the manufacturing cycle.

5. Each month, Haddon Company has $275,000 total manufacturing costs (20% fixed) and $125,000 distribution and marketing costs (36% fixed). Haddon's monthly sales are $500,000.

The markup percentage on full cost to arrive at the target (existing) selling price is

  • 25%.
  • 75%.
  • 80%.
  • 20%.

6.  The benefits of a decentralized organization are greater when a company

  • is large and unregulated.
  • is facing great uncertainties in their environment.
  • has few interdependencies among division.
  • All of the above

7. A transfer-pricing method leads to goal congruence when managers

  • always act in their own best interest.
  • act in their own best interest and the decision is in the long-term best interest of the manager's subunit.
  • act in their own best interest and the decision is in the long-term best interest of the company.
  • act in their own best interest and the decision is in the short-term best interest of the company.

8. When an industry has excess capacity, market prices may drop well below their historical average. If this drop is temporary, it is called

  • distress prices.
  • dropped prices.
  • low-average prices.
  • substitute prices.

9. The range over which two divisions will negotiate a transfer price is

  • between the supplying division's variable cost and the market price of the product.
  • between the supplying division's variable cost and its full cost of the product.
  • anywhere above the supplying division's full cost of the product.
  • between the supplying division's full cost and 180% above its full cost.

10. Division A sells soybean paste internally to Division B, which in turn, produces soybean burgers that sell for $5 per pound. Division A incurs costs of $0.75 per pound while Division B incurs additional costs of $2.50 per pound. Which of the following formulas correctly reflects the company's operating income per pound?

  • $5.00 - ($1.25 + $2.50) = $1.25
  • $5.00 - ($0.75 + $2.50) = $1.75
  • $5.00 - ($0.75 + $3.75) = $0.50
  • $5.00 - ($0.25 + $1.25 + $3.50) = 0



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