Question 1

In a decentralized company in which divisions may buy goods from one another,the transfer pricing system should be designed primarily to

Accepted Answer

The transfer pricing system in a decentralized company should be designed primarily to aid in the appraisal and motivation of managerial performance. This is because transfer pricing has a direct impact on the performance evaluation of division managers. If transfer prices are set too high, it may lead to higher costs for the buying division and negatively impact their performance, while too low a transfer price may lead to lower profits for the selling division. Therefore, a well-designed transfer pricing system is essential to motivate division managers to perform well within the organization.

Question 2

An organizational unit that performs management activities,such as personnel services,that benefit the entire organization is referred to as a(n)________________________________________.

Accepted Answer

The answer of An organizational unit that performs management activities,such...

Question 3

The accounting practices that are practiced by a decentralized organization are referred to as ___________________________________.

Accepted Answer

The answer of The accounting practices that are practiced by...

Question 4

A responsibility center whose manager is responsible for generating revenues and controlling expenses is referred to as a ______________________________.

Accepted Answer

The answer of A responsibility center whose manager is responsible...

Question 5

A situation in which managers pursue goals and objectives that are in the best interests of a particular segment rather than in the best interests of the organization as a whole is referred to as ____________________.

Accepted Answer

The answer of A situation in which managers pursue goals...

Question 6

Which of the following is more characteristic of a decentralized than a centralized business structure?

Accepted Answer

Decentralized business structures are more characteristic of firms that grow very quickly, as they allow for faster decision-making and adaptability by distributing authority across various levels and locations.

Question 7

Costs of decentralization include all of the following except

Accepted Answer

Slow response time to changes in local conditions is a potential cost of decentralization. However, the other options listed (more elaborate accounting control systems, potential costs of poor decisions, and additional training costs) are all actual costs of decentralization.

Question 8

The transfer of authority,responsibility,and decision-making rights from the top to the bottom of an organization is referred to as ____________________.

Accepted Answer

The answer of The transfer of authority,responsibility,and decision-making rights from...

Question 9

An advance pricing agreement can eliminate the possibility of double taxation on multinational exchanges of goods.

Accepted Answer

An advance pricing agreement is a contract between a taxpayer and tax authority that determines the method of pricing and allocates profits for a controlled transaction. By having an agreement in place, there is a lower risk of transfer pricing disputes and double taxation, as the pricing has already been agreed upon by both parties.

Question 10

Transfer pricing is primarily incurred in

Accepted Answer

Transfer pricing is primarily incurred in decentralized organizations, where different departments or divisions set prices for transactions between each other. This can often lead to transfer pricing manipulation to reduce taxes or increase profits. While multinational corporations headquartered in the U.S. may engage in transfer pricing, it is not limited to these organizations. Foreign corporations exporting their products and closely held corporations may also engage in transfer pricing, but they are not the primary sources of transfer pricing.

Question 11

An organizational unit that is responsible for the generation of revenues and has no control over selling prices or costs is referred to as a ______________________________.

Accepted Answer

The answer of An organizational unit that is responsible for...

Question 12

A responsibility center in which a manger has only the authority to control cost is referred to as a(n)_________________________.

Accepted Answer

The answer of A responsibility center in which a manger...

Question 13

A binding contract between a company and one or more national taxing authorities that provides the details of how transfer prices will be set is referred to as a(n)_____________________________________________.

Accepted Answer

The answer of A binding contract between a company and...

Question 14

An organizational unit whose manager is solely responsible for generating revenues is referred to as a ______________________________.

Accepted Answer

The answer of An organizational unit whose manager is solely...

Question 15

An organizational unit whose manager is responsible for acquiring,using,and disposing of assets in order to maximize return on assets is referred to as a(n)______________________________.

Accepted Answer

The answer of An organizational unit whose manager is responsible...

Question 16

Three types of transfer prices are _________________________,_________________________,and ____________________.

Accepted Answer

The answer of Three types of transfer prices are _________________________,_________________________,and...

Question 17

In a decentralized organization,the cost objective is referred to as a ______________________________.

Accepted Answer

The answer of In a decentralized organization,the cost objective is...

Question 18

When one responsibility center uses a transfer price to transfer goods or services to another responsibility center a ___________________________________ is created.

Accepted Answer

The answer of When one responsibility center uses a transfer...

Question 19

An organizational unit that provides specific tasks for other internal units is referred to as a(n)______________________________.

Accepted Answer

The answer of An organizational unit that provides specific tasks...

Question 20

When the majority of authority is maintained by top management personnel,the organization is said to be

Accepted Answer

When the majority of authority is maintained by top management personnel, the organization is said to be centralized. This means that decision-making powers are concentrated in the hands of a select few individuals at the top of the hierarchy, and lower-level employees have less autonomy and discretion to make decisions.

Quiz 13: Responsibility Accounting, support Department Allocations, and Transfer Pricing