Question Details

An advantage of using budgeted costs for transfer pricing 



1.	Cost-based transfer prices are helpful 
	a.	when a market exists for the product.
	b.	when a price is easy to obtain.
	c.	when the product is unique.
	d.	for all of the above.

		

2.	When companies do not want to use market prices or find it too costly, they typically use _______________prices, even though suboptimal decisions may occur.
	a.	average-cost
	b.	full-cost
	c.	long-run cost
	d.	short-run average cost

	3.	Crush Company makes internal transfers at 180% of full cost. The Soda Refining Division purchases 30,000 containers of carbonated water per day, on average, from a local supplier, who delivers the water for $30 per container via an external shipper. In order to reduce costs, the company located an independent supplier in Missouri who is willing to sell 30,000 containers at $20 each, delivered to Crush Company's Shipping Division in Missouri. The company's Shipping Division in Missouri has excess capacity and can ship the 30,000 containers at a variable cost of $2.50 per container. What is the total cost to Crush Company if the carbonated water is purchased from the local supplier?
	a.	$ 900,000 
	b.	$1,200,000 
	c.	$1,501,000
	d.	$1,620,000

	
4.	Crush Company makes internal transfers at 160% of full cost. The Soda Refining Division purchases 40,000 containers of carbonated water per day, on average, from a local supplier, who delivers the water for $40 per container via an external shipper. In order to reduce costs, the company located an independent supplier in Illinois who is willing to sell 40,000 containers at $30 each, delivered to Crush Company's Shipping Division in Missouri. The company's Shipping Division in Missouri has excess capacity and can ship the 40,000 containers at a variable cost of $4.50 per container. What is the total cost of purchasing the water from the Illinois supplier and shipping it to the Soda Division?
	a.	$1,200,000
	b.	$1,380,000
	c.	$1,600,000
	d.	$180,000

	
5.	An advantage of using budgeted costs for transfer pricing among divisions is
	a.	overall corporate profitability is usually higher.
	b.	it usually provides a basis for optimal decision making.
	c.	the divisions know the transfer price in advance.
	d.	it promotes subunit autonomy.





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