Which One of the Following Firms Is Likely to Experience

question 57

Multiple Choice

Which one of the following firms is likely to experience dysfunctional motivation on the part of its managers due to its allocation methods? (CMA adapted)

• A) To allocate depreciation of forklifts used by workers at its central warehouse, Amir Electronics uses predetermined amounts calculated on the basis of the long-term average use of the services provided by the warehouse to the various segments.
• B) Seattle Electronics uses the sales revenue of its various divisions to allocate costs connected with the upkeep of its headquarters building. It also uses ROI to evaluate the divisional performance.
• C) Rose Industrial does not allow its service departments to pass on their cost overruns to production departments.
• D) Xi Enterprises' management information system (MIS) is operated out of headquarters and serves its various divisions. Xi's allocation of MIS-related costs to its divisions is limited to costs the divisions will incur if they were to outsource their MIS needs.

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Definitions:

Gray Market

A situation where products are sold through unauthorized channels, often legally, but without the consent of the original manufacturer.

Manufacturer's Suggested Retail Price

The price that the maker of a product recommends it be sold for in retail stores, often seen as a way to standardize prices and maintain a perceived value.

Authorized Channels

Officially approved and recognized paths or mediums through which products or information are distributed, ensuring legitimacy and compliance with regulations.

Protectionism

A government policy aimed at restricting international trade to protect domestic industries from foreign competition.