Which of the Following Describes the Goal That Should Be

question 14

Multiple Choice

Which of the following describes the goal that should be pursued when setting transfer prices?

• A) Maximize profits of the buying division.
• B) Maximize profits of the selling division.
• C) Allow top management to become actively involved when calculating the proper dollar amounts.
• D) Establish incentives for autonomous division managers to make decisions that are in the overall organization's best interests (i.e., goal congruence).
• E) Minimize opportunity costs.

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Definitions:

Internal Customers

Employees or departments within an organization that rely on the support of another individual or department to fulfill their job duties.

Continuous Improvement

An ongoing effort to improve products, services, or processes for increasing efficiency and effectiveness.

Target Cost

The desired cost to produce a product, determined by subtracting a desired profit margin from a competitive market price.

Target Margin

A predefined profit goal set by a company for a product, project, or the entire organization to achieve within a specific timeframe.