In a Time of Distress Prices, Which of the Following

question 112

Multiple Choice

In a time of distress prices, which of the following is TRUE?

• A)The vendor division should set the transfer price at the distress price on a long-term basis for stability within the overall company.
• B)The vendor division should cease production.
• C)The purchasing division should pay normal prices.
• D)In the short-term, the transfer price should be the distress price as long as this exceeds the incremental costs.
• E)The distress price should be ignored as it is a function of the market, not of the internal capacities of the overall company.

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Definitions:

T Accounts

A visual representation used in accounting to depict debits and credits for a particular account, where one side represents debit entries and the other side represents credit entries.

Transactions

Financial events that affect the financial position of a company, involving the transfer of value between two or more entities.

Financial Statement

A document detailing a company's financial status and business operations, encompassing income statements and balance sheets.

Chart Of Accounts

A systematic list of all accounts used by an organization, classified to facilitate financial management and reporting.