Division Managers at Colonial Company Are Paid a Bonus Based

question 76

Multiple Choice

Division managers at Colonial Company are paid a bonus based on the responsibility margin of their respective responsibility centers.Division A sells goods to Division B and to outside customers.The manager of Division B would most likely prefer that transfer prices be based on:

• A)The market value of the goods purchased from Division A.
• B)The market value of the goods purchased from Division A plus a fixed percentage.
• C)The cost of the goods purchased from Division A.
• D)The cost of the goods purchased from Division A plus a fixed percentage.