decentralized organization

Acct 349 Quiz 7

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Question 1.1. (TCO 8) In a decentralized organization in which subunits may buy goods from one another, the transfer-pricing system should be designed primarily to (Points : 6)        allow subunit managers to buy from external parties.        increase the consolidated value of inventory.        minimize the degree of autonomy of subunit managers.        evaluate performance of individual subunits and their managers.

Question 2.2. (TCO 8) The San Jose Manufacturing Company has two divisions in Kansas—the Holton Division and the Derby Division. Currently, Derby buys a part (10,000 units) from Holton for $16 per unit. Holton has purchased new equipment and wants to increase the price to Derby to $18 per unit. The controller of Derby claims that she cannot afford to go that high, as it will decrease the division’s profit to near zero. Derby can buy the part from an outside supplier for $16 per unit. The incremental costs per unit that San Jose incurs to produce each unit are Holton’s variable cost of $12. Fixed costs per unit to Holton with the recent purchase of equipment are $5. Holton has no alternative uses for its facilities. Should Derby continue to buy from Holton or buy from the external supplier? Company as a whole/Derby Division only (Points : 6)        Buy from external supplier/ Buy from external supplier        Buy from external supplier/ Buy from Holton Division        Buy from Holton Division/ Buy from Holton Division        Buy from Holton Division/ Buy from external supplier

Question 3.3. (TCO 8) An example of a performance measure based on external financial information would be (Points : 6)        market share.        stock prices.        innovative measures.        defect rates.

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