An Advantage of Using Budgeted Costs for Transfer Pricing Among

question 94

Multiple Choice

An advantage of using budgeted costs for transfer pricing among divisions is that ________.

• A) overall corporate profitability is usually higher
• B) it usually provides a basis for optimal decision making
• C) the divisions know the transfer price in advance
• D) it promotes subunit autonomy

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Definitions:

Adjusting Entries

Journal entries made in an accounting period to accommodate incomes and expenditures in their appropriate financial period.

Inventory Returns

Items sent back to the manufacturer or supplier from the buyer due to defects, excess orders, or other reasons.

Perpetual Inventory System

An immediate inventory recording method in accounting that leverages computerized point-of-sale and enterprise asset management software to track purchases or sales.

Quick Ratio

A liquidity ratio that measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.