To Evaluate the Performance of Individual Departments,interdepartmental Transfers of a Product

question 72

Multiple Choice

To evaluate the performance of individual departments,interdepartmental transfers of a product should preferably be made at prices

• A)equal to the market price of the product.
• B)set by the receiving department.
• C)equal to fully-allocated costs of the producing department.
• D)equal to variable costs to the producing department.

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Definitions:

Selling Commission

A fee paid to salespersons or agents for selling a company's products or services, usually a percentage of the sale price.

Net Operating Income

An accounting term representing the profit derived from a company's everyday, non-financial activities and excluding extraordinary items.

CVP Analysis

Short for Cost-Volume-Profit Analysis, it's a management accounting technique used to analyze how changes in costs and volume affect a company’s operating income and net income.

Sales Mix

The combination of different products or services that a company sells, significantly impacting its profitability due to differing margins on each item.