COST ACCOUNTING
TRANSFER PRICING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Not enough time spent in gathering information about different subunits of the organization
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Decreased loyalty toward the organization as a whole
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More management development and learning
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Lack of day-to-day involvement by top management in operating decisions
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Detailed explanation-1: -Mixed costs: A mixed costs contains both fixed and variable elements. There are a variety of procedures that can be employed to separate the fixed and variable components. The easiest is to use two points on the total cost line to derive the slope and intercept.
Detailed explanation-2: -Direct Labor: Direct labor costs are those costs that can be easily i. e., physically and conveniently traced to individual units of product. Direct labor is sometimes called touch labor, since direct labor workers typically touch the product while it is being made, e.g., labor costs of machine operators.
Detailed explanation-3: -The product or service transferred between subunits of an organization is called an intermediate product. The transfer price creates revenues for the selling subunit and costs for the buying subunit affecting each subunit’s operating income.
Detailed explanation-4: -The Santa Fe Manufacturing Company has two divisions in Kansas, the Sam-Seller Division and the Beg-Buyer Division.