Chapter 15 accounting

A supplier whose transfers are mostly internal should be organized as a ______ center.

Cost

Transferring at the differential outlay cost to to the selling division plus the forgone contribution to the company making the internal transfers is referred to as the - __________ __________ __________ pricing policy

Cost-Based Transfer

Transfer pricing policy based on a measure of cost (full or variable costing, actual or standard cost) plus an allowance for profit.

Cost-plus transfer pricing

Transfer prices are important because it affects divisions managers _____________ on whether to engage in the _______________.

Decisions, transactions.

Example of no intermediate market

Divisions must buy and sell from each other.

Transfer pricing system that charges the buying division with costs only and credits the selling division with cost plus some profit allowance. Difference is accounted for in a specialized account.

Dual transfer pricing

Intermediate price is not affected by quantity sold true or false?

False

If the company doesn't have a reliable estimate of variable costs or cannot compute opportunity cost because market prices are not available

Full absorption cost based

A seller is a price setter when the seller

Has a product that is unique, less competition, and uses cost plus pricing to set prices.

If the intermediate market price is affected by the quantity sold, the market is said to be ___________.

Imperfect

A selling division has a variable cost per unit of $15 and fixed costs of $10 per unit. The division manager will be ______ a transfer at a price of $15.

Indifferent from accepting

In a perfect market, the optimal transfer price is the _______________ __________ price.

Intermediate market

The rule for determining optimal transfer price is that variable cost of selling division is _______ than or _________ to transfer price and transfer price is __________ than or ____________ to final market price.

Less, equal 2x.

Intervention by top management is appropriate if transfer pricing problems are infrequent. Plus establishing transfer price policies is an example of what?

Managers goals vs. Companies goals

According to the general rule to accept or reject a transfer price, if an intermediate market exists, the optimal transfer price is the ________ _________

Market price

Market price or small discount from the market price. Discount allows for savings from buying within the company.

Market price based transfer pricing

Transfer pricing policy that sets the transfer price at the market price or at a small discount from the market price.

Market price-based transfer pricing

System that arrives at transfer prices through negotiation between managers of buying and selling divisions.

Negotiated transfer pricing

In a decentralized organization, achieving goals that are in the best interest of both the managers and the organization include having a centrally established transfer price policy or by using ______________ transfer pricing.

Negotiated.

When divisions are not allowed to buy/sell in outside market

No intermediate market

The transfer price that leads both division managers to make decisions that are in the firm's best interests. (Also profitable for both the buyer and seller).

Optimal transfer price

If an intermediate market exists, the _____________ transfer price is the ___________ price.

Optimal, market.

If no intermediate market exists, the ____________ transfer price is the ____________ cost for producing the goods.

Optimal, outlay.

The incremental cost to produce a resource and bring it to the point of transfer is also called the ____________ _________.

Outlay cost

Buyers can buy and sellers can sell any quantity without affecting the price. The product is not differentiated by quality, service, and other characteristics.

Perfect intermediate market

The transfer pricing policy should be established keeping in mind the organization's ___________ _____________ system and the impact that alternative transfer prices will have on individual managers. (Enter only one word per blank.)

Performance, evaluation.

Transfer price does not affect companies _____________ if the transaction to an ____________ takes price.

Profits, outsider

An intermediate market price is a ___________ price.

Selling

A seller is a price ________

Taker

When a product being sold is indistinguishable from all other units of the same product, the buyers and sellers are called price ______________.

Taker

A seller is a price taker if.....

The product they are selling isn't unique, it's a competitive market, and they are unable to control the prices.

What comes before the final market price?

The transfer price

Outlay cost + opportunity cost of the resource at the point of transfer equals

Transfer price

Value assigned to the goods or services sold or rented (transferred) from one unit of an organization to another.

Transfer price

Transfer prices can affect tax liabilities if transferring between two countries or states that have different tax rates true or false?

True

The rule for determining optimal transfer price is that ___________ cost of selling division is less than or Equal to ____________ price and ___________ price is less than or equal to _________ __________ price.

Variable, transfer, transfer, final market.

What makes a transfer price optimal?

When the answer is yes to all 3 questions or no to all 3 questions (increase company, selling, and buying division profits)

A buying division will refuse any transfer price ______

above the final market price

If a selling unit is operating at capacity, the transfer price should be set at ______.

market price