When a Transfer Price Is Set Lower

question 46

Multiple Choice

When a transfer price is set lower

• A)the costs of the division using the intermediate product will fall
• B)the profits of the division using the intermediate product will be unaffected
• C)the profits of the division using the intermediate product will fall
• D)the profits of the division using the intermediate product will rise

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Definitions:

Stock Dividend

A payment to shareholders in the form of additional shares instead of cash.

Retained Earnings

Retained earnings refer to the portion of net income that is retained by the corporation rather than distributed to its shareholders as dividends.

Market Value

The current value of an asset or company based on the price that a buyer is willing to pay in the market.

Liquidating Dividend

A type of dividend payment made by a corporation using its capital base rather than earnings, typically during partial or full liquidation.