An Advantage of Using Budgeted Costs for Transfer Pricing Among

question 77

Multiple Choice

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

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

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Definitions:

Continuous Access

Uninterrupted availability or entry to a service, resource, or facility over time.

Direct Cross-Subsidies

Financial strategy where revenue from one product or service is used to support another product or service within the same organization.

Upfront Cost

Initial investment required before starting a project, service, or acquiring a product, often referred to in financial decisions.

Franchising Revenue Model

A business strategy where a company grants third parties the rights to operate using its brand, system, and ongoing support, in exchange for a fee or a percentage of the revenue.