Management

Please help

35. A limitation of transfer prices based on actual cost is that they

B a. Charge inefficiencies to the department that is transferring the goods

b. Can lead to suboptimal decisions for the company as a whole

c. Must be adjusted by some markup

d. Lack clarity and administrative convenience

36. Negotiated price is often employed when

B a. Market prices are stable c. Goal congruence is not a major objective

b. Market prices are volatile d. Market prices change by a constant rate each year

37. The AAA Division of a company, which is operating at capacity, produces and sells 1,000 units of a certain electronic

component in a perfectly competitive market. Revenue and cost data are as follows:

Sales: P 50,000

Fixed costs: P 12,000

Variable costs: P 34,000

What is the minimum transfer price that should be charged to the BBB Division for each component?

D a. P 12.00 c. P 46.00

b. P 34.00 d. P 50.00

38. Division A of company is currently operating at 50% capacity. It produces a single product and sells all its production to

outside customers for P 13 per unit. Variable costs are P 7 per unit, and fixed costs are P 6 per unit at the current

production level. Division B, which currently purchases this product from an outside supplier for P 12 per unit, would like

to purchase the product from Division A. Division A will operate at 80% capacity to meet outside customer's and Division

B's demand. What is the minimum price that Division A should charge Division B?

A a. P 7.00 per unit c. P 12.00 per unit

b. P 10.40 per unit d. P 13.00 per unit

39. An appropriate transfer price between two divisions of the Emerald Co. can be determined from the following data:

Fabricating Division:

Market price of sub-assembly P 50

Variable cost of sub-assembly P 20

Excess capacity 1,000

Assembling Division:

Number of items needed 900

What is the natural bargaining range for the two divisions?

A a. Between P 20 and P 50 c. Any amount less than P 50

b. Between P 50 and P 70 d. P 50 is the only acceptable price

40. The 1st division of Gold Company produces Part I that is to be used by Gold as a key part in its products. Costs and sales

data on Part I are as follows:

Selling price per unit: P 100

Variable cost per unit: P 60

Fixed cost per unit: P 24 (based on 40,000 units capacity per annum)

Gold's 2nd division is introducing a new product that will use Part I. An outside supplier has quoted 2nd division a price

of P 96 per unit. This represents the usual P 100 price less a quantity discount due to the large number of 2nd

division's requirement. If the 2nd division would buy 15,000 units of Part I from the 1st division, the effect on the

corporate-profits would be:

D a. Increase by P 240,000 c. Increase by P 210,000

b. Increase by P 1,500,000 d. Reduce by P 60,000