25. Which of the following is managements challenge when setting transfer prices?

a.	Ensuring the buyer has goal congruence with respect to the organizations goals.
b.	Ensuring the seller has goal congruence with respect to the organizations goals.
c.	Ensuring either the buyer or the seller, but not both, has goal congruence with respect to the organizations goals.
d.	Ensuring both the buyer and seller have goal congruence with respect to the organizations goals.

26. Which of the following transfer pricing procedures maximizes the companys profit by transferring at the differential outlay cost to the selling division plus the opportunity cost to the company of making the internal transfers?

a.	effective transfer pricing rule.
b.	economic transfer pricing rule.
c.	efficient transfer pricing rule.
d.	None of the answers is correct.

27. What is generally considered the best transfer pricing basis when there is a competitive market for the product and market prices are readily available?

a.	Market price-based transfer pricing
b.	Variable cost-based transfer pricing
c.	Fixed price-based transfer pricing
d.	Fixed cost-based transfer pricing

Colonial Computing Systems

Colonial Computing Systems manufactures and sells various computer products and has two decentralized divisions: (1) Production and (2) Marketing. The Marketing Division has always purchased a particular mouse from Production at $55 per unit. The Production Division is considering raising the price to $60 per unit. The Production Division's costs related to the mouse production is as follows:

Variable costs per unit:	$55
Monthly fixed costs:	$12,000

The Marketing Division handles the promotion and distribution of the mouse purchases from the Production Division and sells each mouse for $100. Marketing Division incurs monthly fixed costs of $5,000. Marketing Division sells 1,500 units per month. Marketing Division can buy the same mouse from outside suppliers for $60. If the Marketing Division purchases the mouse from outside suppliers, the facilities the Production Division uses to manufacture the mouse would remain idle.

28. Refer to Colonial Computing Systems. The Production Division is operating below capacity because of weak global demand for the product. What should be the mouse transfer price between the Production Division and Marketing Division in order for Colonial to optimize profits?

a.	$ 60
b.	$ 55
c.	$ 50
d.	$100