Which of the Following Is a Limitation of Cost-Based Transfer

question 47

Multiple Choice

Which of the following is a limitation of cost-based transfer pricing?

• A)determining which cost to use
• B)lack of incentive for selling division to control cost
• C)inefficiencies in one unit may be transferred to another unit
• D)all of the above

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Definitions:

Stockholders' Equity

The residual interest in the assets of a corporation after deducting liabilities, representing the ownership equity held by stockholders.

Fixed Assets

Long-term tangible assets used in the operation of a business and not expected to be converted to cash in the short term.

Long-term Liabilities

Obligations or debts due beyond one year or the normal operating cycle, including bonds payable, long-term leases, and pension liabilities.

Vertical Analysis

A method in financial statement analysis where each entry for each of the three major categories of accounts (or financial statements) is represented as a proportion of the total account.