Transfer Prices Do Not Affect Managers Whose Compensation Is Directly

question 84

True/False

Transfer prices do not affect managers whose compensation is directly dependent on an organization's operating income because transfer prices affect only divisional profits and not the organization's profit.

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Definitions:

Acquisition Differential

The gap between what a company is bought for and the net market value of its recognizable assets and liabilities.

Joint Venture

A business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance.

Retained Earnings

Accumulated net profits of a company not distributed as dividends but reinvested in the business or kept as a reserve.

Non-Controlling Interest

A ownership in a corporation where the stake is less than a majority of the voting shares, often referring to minority interests in subsidiary companies.