When a Company Uses Activity-Based Transfer Prices

question 53

Multiple Choice

When a company uses activity-based transfer prices:

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

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Definitions:

Checkable Deposits

Checkable deposits are bank account balances that depositors can easily withdraw or write checks against at any time, constituting a primary medium of exchange for personal and business transactions.

Required Reserve Ratio

The proportion of depositors' balances banks must have on hand as cash, mandated by the central bank.

Excess Reserves

The reserves held by banks that are greater than the minimum amounts required by regulators, which can be lent out or invested.

Checkable Deposits

Bank account balances that can be withdrawn on demand using checks or electronic methods.