Which of the Following Responsibility Centers Is Affected by the Use

question 145

Multiple Choice

Which of the following responsibility centers is affected by the use of market-based transfer prices?

• A) Cost center.
• B) Profit center.
• C) Revenue center.
• D) Production center.

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Definitions:

Payback Period

The length of time it takes for an investment to recover its initial cost out of the cash inflows that it generates.

Simple Rate of Return

A method of investment appraisal that calculates the annual incremental net operating income as a percentage of the initial investment.

Cash Operating Costs

Costs that a company incurs during its normal business operations, paid in cash, such as wages, utilities, and rent.

Pretax Return

The income generated by a business before any tax obligations are deducted.