The Primary Objective in Setting Transfer Prices Is to ________

question 213

Multiple Choice

The primary objective in setting transfer prices is to ________.

• A) establish a system that determines the best transfer prices for the company as a whole
• B) evaluate the managers of the responsibility centers involved
• C) achieve goal congruence by selecting a price that will maximize overall company profits
• D) make it easy for managers to select prices that maximize division profits

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Definitions:

Machine Hours

A measure of production or work done, calculated by the number of hours a machine is operated.

Sales Mix

The variation in the quantities and types of products or services that a company sells, influencing the total revenue and profits.

Production Information

Data related to the manufacturing process, including quantities produced, costs, and production times.

Direct Labor Hours

The hours worked by employees that can directly be attributed to specific units of production.