BBA108_Financial and Management Accounting(Draft 2)-converted

b. opportunity cost plus incremental cost c. variable cost or variable cost-plus profit d. full cost-plus profit 2. A dual transfer pricing system is set up where a. the two sides cannot agree on a price and the difference between the two sides is absorbed by the home office b. a ready market price is not available and the two sides must come up with an agreeable price c. the buyer buys at variable cost and the seller only sells at full cost d. the two sides agree to use a cost basis for transfer pricing 3. The objective(s) of transfer pricing are a. to motivate managers b. to provide an incentive for managers to make decisions consistent with the firm's goals c. to provide a basis for fairly rewarding the managers d. All of these 4. The basic methods used in transfer pricing are a. variable or full costs b. dual prices c. market price or negotiated price d. All of these 5. Market pricing approach in transfer pricing 150 a. helps to preserve unit autonomy b. provides incentive for the selling unit to be competitive with outside suppliers c. has arm's-length standard desired by taxing authorities d. may be the most practical approach when there is significant conflict Answer CU IDOL SELF LEARNING MATERIAL (SLM)

1. c 2. a 3. d 4. d 5. d REFERENCES • Anthony, R.N. and Reece, J.S. (1988). Accounting Principle. New York: Richard Irwin Inc. • Gupta RK. and Radha swamy, M. (2004). Financial Accounting. New Delhi: Sultan Chand and Sons • Monga J. R, Ahuja Girish, and Sehgal Ashok. (2014). Financial Accounting. Noida: Mayur Paper Back. • Shukla, M.C. Grewal T.S. and Gupta, S.C. (2016). Advanced Accounts. New Delhi: S. Chand & Co. • R.K. Mittal, M.R. Bansal. (2018). Advanced Financial Accounting. New Delhi: VK Publications. 151 CU IDOL SELF LEARNING MATERIAL (SLM)