13. The The supplying B. There will be litle inertie C Managers may on the part

Question

13. The The supplying B. There will be litle inertie C Managers may on the part of the supplying managoe to supply goods and the supplying time negotiating the transfer price difficult so nd that the transfer price is 14. In the context of transfer pricing. dual pricing is: A. Never used when numerous conf B. The two units. pricing simultaneous use of two or more transfer pricing methods. use of two or more transfer pricing methods by the buyer only D. Not commended because of negative behavioral consequences 15. The most likely result of a negotiated transfer price is that it: A. Takes away the ultimate responsibility of the resulting transfer price from the two parties. B. Decreases sub-unit (i.e., divisional) autonomy C. Can be costly and time-consuming to implement. D. Generally results in transferring more than the optimum number of units between the buying and selling divisions of the organization.

Explanation / Answer

1) The primary limitation of a full cost based transfer pricing system is the

Solution: The supplying and purchase divisions are more likely to make decisions that are inconsistent with the goals of the organisation as a whole

Explanation: One primary limitation of full-cost-based transfer prices is that it results to suboptimal decisions for the organisation as a whole.

2) In the context of transfer pricing, dual pricing is

Solution: The simultaneous use of two or more transfer pricing methods

Explanation: Dual pricing is the usage of two separate transfer-pricing methods for determining the price of each transfer from one subunit to another

3) The most likely result of a negotiated transfer price is that it

Solution: may reflect the relative negotiating skills of the two parties

Explanation: Negotiated transfer prices, and the production decisions indicates the negotiating skills of the parties instead of the economic consideration

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