The Transfer Price Between Subsidiaries That Maximizes Profit for the Parent

question 71

Multiple Choice

The transfer price between subsidiaries that maximizes profit for the parent company

• A)is the marginal cost of the producing subsidiary.
• B)is the monopoly price of the producing subsidiary.
• C)cannot be determined in the absence of non-production cost considerations such as taxes.
• D)is the price that minimizes the purchasing subsidiary's marginal cost.

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Definitions:

Borrower

An individual, company, or institution that receives funds from a lender under the condition of paying back the borrowed amount plus interest.

Compounded Monthly

Interest calculated monthly on the principal sum plus previously earned interest.

Equal Payments

Regularly scheduled payments of the same amount, common in loans and amortization plans.

Compounded Annually

Interest that is calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan, done once a year.