A Division Manager May Decide to Purchase Materials from an Outside

question 126

Multiple Choice

A division manager may decide to purchase materials from an outside supplier even though another division of the firm could produce the materials at a lower incremental cost using currently idle facilities.This is an example of

• A)profit maximization.
• B)centralization.
• C)goal-congruent behavior.
• D)non-goal-congruent behavior.

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Definitions:

Treasury Stock

Shares that were issued and subsequently reacquired by a company, held in its own treasury.

Stockholders' Equity

Represents the owners' residual interest in the assets of a corporation after deducting liabilities.

Prior Period Adjustment

Corrections of material errors related to a prior period or periods, excluded from the determination of net income.

Retained Earnings

The portion of a company's profits that is kept or retained for reinvestment in the business, rather than being distributed to shareholders as dividends.