Which of the Following Is True of Transfer Pricing

question 33

Multiple Choice

Which of the following is true of transfer pricing?

• A) It creates costs for the selling subunit.
• B) It creates revenues for the buying subunit.
• C) It helps top managers evaluate the performance of individual subunits.
• D) It makes managers' information-processing and decision-making tasks difficult.

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Definitions:

Labour Time

The total hours worked by employees measurable for a specific period, often used for costing and productivity analysis.

Predetermined Overhead Rate

A rate calculated before a period begins, used to allocate estimated overhead costs to products or job orders based on a chosen activity base.

Direct Labour-hours

The total hours worked by employees directly involved in the manufacturing process.

Work in Process

Items that are in the process of being manufactured but are not yet complete.