If a Company Charges Its Subsidiary in a Foreign Country

question 94

True/False

If a company charges its subsidiary in a foreign country too low a transfer price, it can be accused of dumping.

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Definitions:

Overhead-Applied Account

Refers to an account where the applied (estimated) manufacturing overhead costs are accumulated.

Application of Overhead

The application of overhead involves allocating manufacturing overhead costs to produced goods based on a predetermined formula or rate.

Manufacturing Overhead Costs

Indirect costs related to manufacturing that cannot be directly attributed to specific products, including costs such as factory rent and utilities.

Machine Hours

A measure of the operating time of machines or equipment, used in allocating manufacturing costs based on usage.