# learning objective 24 5 1 the transfer price is the transaction amount of one unit o 4306421

Learning Objective 24-5

1) The transfer price is the transaction amount of one unit of goods when the transaction occurs between the company and its customers.

2) The primary objective in setting transfer prices is to achieve goal congruence by selecting a price that will maximize the overall company profits.

3) A cost-based transfer price considers the cost of the producing the goods when determining the price.

4) In many cases, the amount of transfer price does not affect the overall company profits.

5) The transfer price should be an amount between the market price and the variable cost.

6) When a division is operating at full capacity, the transfer price can be any of variable cost, full cost or cost plus a mark-up.

7) If a company allows division managers to negotiate a cost-based transfer price, it is better to use actual costs rather than standard costs. Otherwise, the selling division has no motivation to control costs.

8) When a division is operating at full capacity, the transfer price must be ________.

A) based on opportunity cost

B) a market-based transfer price

C) a cost-based transfer price

D) total manufacturing cost

9) Opportunity cost is the benefit ________.

A) received by selling goods on behalf of another division

B) received by selling goods to one of the other divisions within the company

C) foregone by purchasing goods at a price lower than its total manufacturing cost

D) foregone by choosing an alternate course of action

10) A market-based transfer price considers the ________ when determining the transfer price.

A) variable costs

B) sales price of goods

C) cost of the goods

D) contribution margin

11) WAX-D Inc. has a division that manufactures a component that sells for \$150 and has a variable cost of \$45. Another division of the company wants to purchase the component. Fixed cost per unit of component is \$25. What is the minimum transfer price if the division is operating at capacity?

A) \$150

B) \$45

C) \$55

D) \$140

12) WAX-D Inc. has a division that manufactures a component that sells for \$150 and has a variable cost of \$45. Another division of the company wants to purchase the component. Fixed cost per unit of component is \$25. What is the minimum transfer price if the division is operating below its capacity?

A) \$50

B) \$45

C) \$70

D) \$40

13) WAX-D Inc. has a division that manufactures a component that sells for \$150 and has a variable cost of \$45. Another division of the company wants to purchase the component. Fixed cost per unit of component is \$25. What is the maximum transfer price if the division is operating below its capacity?

A) \$70

B) \$170

C) \$150

D) \$30