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A Combination of an Increase in Investment and a Decrease

question 94

Multiple Choice

A combination of an increase in investment and a decrease in exports would:

Determine the maximum price a buying division should be willing to pay for internal transfers.
Understand how idle capacity affects transfer pricing decisions.
Evaluate the overall financial effect of transfer pricing decisions on a company's net operating income.
Understand the concept of transfer pricing within a corporation.

Definitions:

Avoidable Cost

A cost that can be eliminated by choosing one alternative over another in a decision. This term is synonymous with differential cost and relevant cost.

Activity-Based Costing

An accounting method that assigns costs to products based on the activities involved in producing those products.

Decision

The process of making choices among alternative courses of action.

Sunk Costs

Costs that have already been incurred and cannot be recovered, and thus should not affect future business decisions.

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