The Overall Objective in the Determination of a Transfer Price

question 71

Multiple Choice

The overall objective in the determination of a transfer price is to

• A) maximize the return of the selling division.
• B) minimize the cost to the purchasing division.
• C) minimize the return of the selling division.
• D) maximize the return to the whole company.

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Definitions:

Simple Consideration

The minimal requirement of value that must be exchanged between parties entering into a contract, for the contract to be considered valid.

Indorsement

The act of signing the back of a negotiable financial instrument, thereby making it payable to someone other than the named holder.

Signature

A person's name written in a distinctive way as a form of identification in authorizing a document.

Check

A written, dated, and signed instrument that directs a bank to pay a specific sum of money to the bearer or a designated entity from the drawer's account.