ACCT 3121 Final Exam - Questions and Answers The transfer-pricing method that reduces the goal-congruence problems associated with a pure costplus-based
... [Show More] transfer-pricing method is: A) dual pricing B) market pricing C) single pricing D) Both A and B are correct. Dual pricing is NOT widely used in practice because: A) the manager of the supplying division does not have sufficient incentive to control costs B) it increases goal congruence C) managers are not insulated from the frictions of the market place D) Both B and C are correct. Which of the following transfer-pricing methods always achieves goal congruence? A) a market-based transfer price B) a cost-based transfer price C) a negotiated transfer price D) full-cost plus a standard profit margin The minimum transfer price equals: A) opportunity costs less the additional outlay costs B) opportunity costs times 125% plus the additional outlay costs C) opportunity costs divided by the additional outlay costs D) incremental costs plus opportunity costs When managers set and measure target levels of performance A) historical-cost-based accounting measures are usually adequate for evaluating economic returns on new investments. B) historical-cost ROIs cannot be used to evaluate current performance. C) the timing of feedback is not dependent on the sophistication of the organization's information technology. D) the timing of feedback depends on the specific level of management receiving the feedback. If a company is a multinational company with operations in several different countries, one way to achieve comparability of historical-cost based ROIs for facilities in different countries is to: A) restate the results of operations using the cash basis method of accounting B) use GAAP for all reporting and calculations C) restate the results of all operations in dollars D) All of these answers are correct. A problem with rewarding managers only on the basis of residual income is that: A) residual income is difficult to measure B) on occasion the items in the residual income calculation are not quantifiable C) residual income can depend on items over which the manager has little control D) All of these answers are correct. ________ describes contexts in which an employee prefers to exert less effort than the effort that the owner wants because the employee's effort cannot be accurately monitored and enforced. A) Goal congruence B) Moral hazard C) Management compensation D) Incentive compensation Many manufacturing, marketing, and design problems require employees with multiple skills; therefore, teams are used and the members have the added encouragement of: A) individual incentives B) management incentives C) morale incentives D) team incentives A part of a control system that describes standards of behavior and codes of conduct expected of all employees, especially actions that are off-limits, is known as a(n): A) diagnostic control system B) boundary system C) belief system D) interactive control system A part of a control system that articulates the mission, purpose, and core values of a company is known as a(n): A) diagnostic control system B) boundary system C) belief system D) interactive control system Managers use ________ to create an ongoing dialog around the organization's key strategic issues to personally involve themselves in subordinates' decision-making activities. A) diagnostic control systems B) boundary systems C) belief systems D) interactive control systems D) interactive control systems Soft Cushion Company is highly decentralized. Each division is empowered to make its own sales decisions. The Assembly Division can purchase stuffing, a key component, from the Production Division or from external suppliers. The Production Division has been the major supplier of stuffing in recent years. The Assembly Division has announced that two external suppliers will be used to purchase the stuffing at $20 per pound for the next year. The Production Division recently increased its unit price to $40. The manager of the Production Division presented the following information variable cost $32 and fixed cost $8 t o top management in order to attempt to force the Assembly Division to purchase the stuffing internally. The Assembly Division purchases 20,000 pounds of stuffing per month. What would be the monthly operating advantage (disadvantage) of purchasing the goods internally, assuming the external supplier increased its price to $50 per pound and the Production Division is able to utilize the facilities for other operations, resulting in a monthly cash-operating savings of $30 per pound? A) $1,000,000 B) $360,000 C) $(240,000) D) $(400,000) Purchase cost: (20,000 lbs. × $50) $1,000,000 Outlay cost: (20,000 lbs. × $32) (640,000) Opportunity cost: (20,000 lbs. × $30) (600,000) Advantage/ (Disadvantage) $ (240,000) Global Giant, a multinational corporation, has a producing subsidiary in a low tax rate country and a marketing subsidiary in a high tax country. If Global Giant wants to minimize its worldwide tax liability, we would expect Global Giant to: A) stop producing in the low tax rate country B) stop marketing in the high tax rate country C) establish a low transfer price when the producing unit sells to the marketing unit D) establish a high transfer price when the producing unit sells to the marketing unit [Show Less]