When a Company Uses Activity-Based Transfer Prices

question 19

Multiple Choice

When a company uses activity-based transfer prices:

• A) The internal buyer is motivated to understate the number of units to buy internally
• B) Capacity is usually reserved for products or services that are transferred internally
• C) The internal buyer is motivated to overstate the number of units to buy internally
• D) Batch-level costs are excluded from the computation

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Definitions:

Feedback Loop

A system where the outputs loop back as inputs, influencing the process and potentially leading to self-amplifying or self-dampening outcomes.

Junk Science

Information or analysis claimed to be scientific but lacking in integrity, rigor, or adherence to established standards and methods.

Phase Change

A transition among the basic states of matter: solid, liquid, and gas, involving energy changes without altering the chemical composition of a substance.

Half-life

The time required for half the amount of a particular substance, such as a radioactive element or drug, to undergo a process of decay or elimination.