Which of the Following Is True

question 45

Multiple Choice

Which of the following is true?

• A)There are two approaches for determining a transfer price: cost-based and market-based.
• B)If a cost-based transfer price is used, the transfer price must be based on variable cost.
• C)A problem with a cost-based transfer price is that it does not provide adequate incentive for the selling division to control costs.
• D)The market-based transfer price approach produces a higher total contribution margin to the company than the cost-based approach.

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Definitions:

Predict

The act of forecasting future events or conditions based on current knowledge or data.

Somatic Marker Hypothesis

A theory suggesting that emotional processes guide (or bias) behavior, particularly decision-making, via bodily feelings.

Decision Process

A sequence of cognitive operations involved in making a choice between different alternatives.

Job Offer

A proposal by an employer to a prospective employee to begin employment in a specific position under agreed-upon terms.