If a Company Allows Division Managers to Negotiate a Cost-Based

question 97

True/False

If a company allows division managers to negotiate a cost-based transfer price,it is better to use actual costs rather than standard costs.Otherwise,the selling division has no motivation to control costs.

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Definitions:

Inventory Turnover

A ratio that measures how many times inventory is sold and replaced over a certain period, used to evaluate the efficiency of a company's inventory management.

Average Collection Period

The average number of days it takes for a company to receive payments owed by its customers.

Collection Policies

Guidelines established by a business to manage the collection of accounts receivable or debts owed to it.

Subsidiary Ledger

a detailed ledger that contains the financial transactions of a specific subsidiary account, summarizing its details, and supporting the general ledger.