I need all the awncers to thease questions some times you onley give me te first three.Multiple Choice

Select the best answer to each question. Space is provided for computations after the quantitative questions.

____ 1. (CMA adapted) Which of the following is decentralization least likely to accomplish?

a. Provide a pool of management talent.

b. Shorten decision time.

c. Heighten goal congruence.

d. Increase motivation of subunit managers.

____ 2. (CPA) Brent Co. has intracompany service transfers from Division Core, a cost center, to Division Pro, a profit center. Under stable economic conditions, which of the following transfer prices is likely to be most conducive to evaluating whether both divisions have met their responsibilities?

a. Actual cost

b. Standard variable cost

c. Actual cost plus a markup

d. Negotiated price

____ 3. Designing the transfer-pricing system is most difficult in organizations that are:

a. highly decentralized with many interdependencies among subunits.

b. highly centralized with many interdependencies among subunits.

c. highly decentralized with few interdependencies among subunits.

d. highly centralized with few interdependencies among subunits.

___ 4. (CMA) Parkside Inc. has several divisions that operate as decentralized profit centers. Parksides Entertainment Division manufactures video arcade equipment using the products of two of Parksides other divisions. The Plastics Division manufactures plastic components; one type is made exclusively for the Entertainment Division, while other less complex components are sold to external markets. The products of the Video Cards Division are sold in a competitive market, but one video card model is also used by the Entertainment Division. The actual manufacturing cost per unit of the Entertainment Division is as follows:

Plastics Components

Video Cards

Direct materials used

$1.25

$2.40

Direct manuf. labor

2.35

3.00

Variable overhead

1.00

1.50

Fixed overhead

.40

2.25

Total cost per unit

$5.00

$9.15

The Plastics Division sells its commercial products at full cost plus a 25% markup based on cost and believes the proprietary plastic component made for the Entertainment Division would sell for $6.25 per unit on the open market. The market price of the video card used by the Entertainment Division is $10.98 per unit.

Assuming the Video Cards Division has no unused capacity, a transfer price to the Entertainment Division of $9.15 per unit will:

a. allow evaluation of both divisions on a competitive basis.

b. satisfy the Video Cards Divisions profit desire by allowing recovery of opportunity costs.

c. not motivate the Entertainment Division and will cause mediocre performance.

d. provide no incentive for the Video Cards Division to control or reduce costs.

e. encourage the Entertainment Division to purchase video cards from an external source.

____ 5. Use the information in question 4 but assume the Entertainment Division is able to purchase a large quantity of video cards from an external supplier at $8.70 per unit. The Video Cards Division, having unused capacity, agrees to lower the transfer price to $8.70 per unit. This action will:

a. optimize the profit goals of the Entertainment Division while subverting the profit goals of Parkside Inc.

b. provide no profit incentive for the Video Cards Division.

c. subvert the profit goals of the Video Cards Division while optimizing the profit goals of the Entertainment Division.

d. cause mediocre performance in the Video Cards Division because opportunity costs increase.

e. optimize the overall profit goals of Parkside Inc.

____ 6. Use the information in question 4 and assume the Plastics Division has unused capacity and negotiates a transfer price of $5.60 per plastic component with the Entertainment Division. This price will:

a. cause the Plastics Division to reduce the number of commercial plastic components it manufactures.

b. motivate both divisions.

c. encourage the Entertainment Division to seek an external supplier for plastic components.

d. not motivate the Plastics Division, causing mediocre performance.

e. satisfy the Plastics Divisions profit desire by allowing recovery of opportunity costs.

____ 7. (CPA adapted) Mar Company has two decentralized divisions, X and Y. Division X has been purchasing certain component parts from Division Y at $75 per unit. Because Division Y plans to raise the price to $100 per unit, Division X desires to purchase these parts from external suppliers for $75 per unit. The following information is available:

Ys variable cost per unit

$70

Ys annual fixed costs

$15,000

Ys annual production of these parts for X

1,000 units

If Division X buys from an external supplier, the facilities Division Y uses to manufacture these parts will be idle. Assuming Division Ys fixed costs cannot be avoided, what is the result if Mar requires Division X to buy from Division Y at a transfer price of $100 per unit?

a. It is suboptimal for the company as a whole because X should buy from external suppliers at $75 per unit.

b. It is more profitable for the company as a whole than allowing X to buy from external suppliers at $75 per unit.

c. It provides higher overall company operating income than a transfer price of $75 per unit.

d. It provides lower overall company operating income than a transfer price of $75 per unit.