Which of the Following Is an Advantage of Cost-Based Transfer $\quad$

question 35

Multiple Choice

Which of the following is an advantage of cost-based transfer prices?
I $\quad$ Managers do not have much incentive to reduce fixed costs
II $\quad$ Managers may be motivated to purchase goods and services from outside the company
IV $\quad$ Contribution margins may be split between buying and selling divisions

• A) I only
• B) II only
• C) III only
• D) None of the above (I, II, and III are all disadvantages)

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Definitions:

E(XY)

The expected value of the product of two random variables, indicating their joint variability.

Coefficient of Correlation

A measure that indicates the extent to which two variables fluctuate together. A value closer to 1 or -1 indicates a strong relationship, while a value near 0 suggests no relationship.

X and Y

Typically used to represent independent and dependent variables in a mathematical function or data set, respectively.

Marginal Probability

is the probability of an event occurring without considering other related events.