A limitation of transfer prices based on actual cost is that they Must be adjusted by some markup. Can lead to suboptimal decisions for the company as a whole Lack clarity and administrative convenience. Charge inefficiencies to the department that is transferring the goods

A limitation of transfer prices based on actual cost is that they Must be adjusted by some markup. Can lead to suboptimal decisions for the company as a whole Lack clarity and administrative convenience. Charge inefficiencies to the department that is transferring the goods

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Q: explain why GAAP requires full absorption costing (instead of variable costing) if absorption…

A: Introduction:- i)Absorption costing:- Under the absorption costing, The following costs included in…

Q: When absorption costing is used a. management may be tempted to overproduce in a given period in…

A: Absorption costing is a method of calculating the cost of a product or enterprise by taking into…

Q: All the following are true for absorption costing, except O is used for GAAP reporting purposes. O…

A: Hi studentSince there are multiple questions, we will answer only first question.Absorption costing…

Q: Wrong classification of imported goods may lead to a. Goods being shipped to wrong address. b.…

A: Solution: Custom duty rates on imports vary from product to product. Therefore it is necessary that…

Q: Challenges with how direct costs are distributed to cost objects in different companies can give…

A: As the proprietor of a startup or independent company, there are critical perspectives you ought to…

Q: A disadvantage of absorption costing is A.) None of the answers are correct. B.) Both answers are…

A: Absorption costing is a method of accounting for the cost of producing a product that includes both…

Q: what is the effect on transportation costs if the purchaser controls a shipment directly from the…

A: Cost: The amount paid to purchase the asset, install it, and put it into operations, is referred to…

Q: f accepting a special order is an example of avoidable costs. True False

A: Avoidable cost are cost that can be avoided if a activity is not undertaken, resulting in cost…

Q: Firms keep supplies of inventory for which of the following reasons? To provide a feeling of…

A: Hi, since there are multiple questions, I will answer the first question. Would request you to…

Q: Absorption costing is intended for Select one: O a. None of the above O b. Outside distribution or…

A: Absorption Costing:-It refers to the method of costing to account for all the costs of…

Q: Refer to Supply Chain systems. What is the oplonich invonton?

A: Supply Chain System: A supply chain is a system of organizations, people, activities, information,…

Q: part of a process happen without negatively impacting another part? What are some reasons for erring…

A: Lean methodology eliminates waste to the core in a process and ensures that reduction in delays…

Q: Which of the following statements is false ? a. Volume-based costing has typically resulted in…

A: There are two methods of costing that are in place generally. One is volume based costing and other…

Q: Why can full cost accounting lead to wrong management decisions?

A: Full cost accounting says that total costs of the product either it is fixed costs or it is variable…

Q: Which is not a common method used to allocate costs under the departmental approach? Multiple…

A: The common method used to allocate costs under the departmental approach are as follow: Step…

Q: Which of the following is not a factor to consider when deciding whether to accept a special order?…

A: It is the process of making decisions that involve the management of costs in order to achieve…

Q: Which one of the following is not a disadvantage of the specific identification method of inventory…

A: Under specific identification methods of inventory, specific inventory movement is measured. So it…

Q: A decision about one product is said to have ________ effects when a change in the sales of one…

A: A decision about one product is said to have ________ effects when a change in the sales of one…

Q: Under EOQ approaches, order costs can be minimised by placing large, infrequent orders for…

A: GIVEN Under EOQ approaches, order costs can be minimised by placing large, infrequent orders for…

Q: Comparison between incremental revenues and incremental costs is the decision base for: a.…

A: Incremental revenue and incremental cost concept means where while taking any decision , we wants to…

Q: In using the high-low method, the data which relate to company’s operation during abnormal situation…

A: Solution: In using the high-low method, the data which relate to company’s operation during abnormal…

Q: A possible disadvantage of the ABC method is: (a) It does not allocate costs to the way production…

A: Definition: Activity-based method (ABC): The costing method which allocates overheads to the…

Q: ferent between Informal and formal cost of sales

A: Step 1 The cost of sales is the amount of all expenses incurred in the production of a product or…

Q: The First- In- First- Out method, which is mainly utilized to assign the average cost of production…

A: First in first out (FIFO) is one of the method of inventory valuation, under which inventories which…

Q: 1. Which of the following is a disadvantage of the Variable Costing method? A. The data available…

A: A cost accounting technique known as "variable costing" treats fixed manufacturing costs as period…

Q: One disadvantage of activity-based costing is that it cannot be used for external reporting. This is…

A: Introduction Activity based Costing (ABC) is a method of assignment of overhead costs to the…

Q: Firms may choose to use absorption costing or variable costing for external financial reporting…

A: Absorption costing: Absorption costing includes all manufacturing costs, both variable and fixed, in…

Q: Why do you think a company would ever choose to use perpetual LIFO as its costing method? It is…

A: Note: Since you have posted multiple questions, we will solve the first question. Please submit a…

Q: assertions below is (are) correct

A: Assertions are the claims made by the management on the items in financial statements.

Q: TRUE OR FALSE In activity-based costing systems, costs are not classified as either direct or…

A: Answer: In activity-based costing systems, costs are not classified as either direct or indirect…

Q: Marginal costing is usually deployed when decisions about volume are being made. Discuss the…

A: Monetary Accounting has appeared with the advancement of huge scope business as business entities.…

Q: 8) A single indirect-cost rate distorts product costs because A) there is an assumption that all…

A: Answer : Option A " There is an assumption that all support activities affect all products in a…

Q: A basic belief of variable costing is that period costs should be currently expensed. What is the…

A: A variable cost is one of the important method related to costing. Basically it is a expense of a…

Q: Why do product-costing systems based on a single, volume-based cost driver tend to over-cost…

A: Single volume-based cost driver means the basis of allocation of costs to particular products using…

Q: Which of the following statements is false? Multiple Choice O In general, the term expense is used…

A: In accounting we use different terms and words on a regular basis like revenue, costs, expenses,…

Q: Absorption coating requires accounting estimates and allocations to value inventory. Transfer…

A: Absorption costing is a traditional method of accounting for the cost of producing goods or…

Question

A limitation of transfer prices based on actual cost is that they

Must be adjusted by some markup.
Can lead to suboptimal decisions for the company as a whole
Lack clarity and administrative convenience.
Charge inefficiencies to the department that is transferring the goods

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Similar questions

sales commissions are regarded as a product costs true false
Which of the following is not a reason for banks to use activity- based costing? C a. to determine profitability of services provided Ob. to determine service quality c. to determine the amounts charged to customers for services provided Od. all of the above
Direct Expenses of a Department are ordinarily considered to be uncontrollable costs. TRUE FALSE
Explain how absorption costing can enable a manager to increase production solely for the purpose of inflating profit but prevents a manager from doing this if variable costing is used.
Which of the following is NOT an objective of determining product costs for manufacturing firms? A) To determine selling prices B) to reduce operating leverage C) to make decisions D) to do financial reporting
Which of the following best defines " stockout costs"? A) They are physical goods used in operations. B) They are costs associated with retrieving inventory items from a workshop C) They are costs associated with interruptions to assembly lines D) They are associated with inventory being unavailable when needed to meet demand. E) None of the above.
For each situation, list the assumption, principle, or constraint that has been violated, if any. List only one answer for each situation. a. East Lake Company recognizes revenue at the end of the production cycle but before sale. The price of the product, as well as the amount that can be sold, is not certain. choose one of the assumption, principle or constraint Going concern assumptionPeriodicity assumptionNo violationHistorical cost principleRevenue recognition principleEconomic entity assumption b. Hilo Company is in its fifth year of operation and has yet to issue financial statements. (Do not use the full disclosure principle.) choose one of the assumption, principle or constraint Historical cost principleGoing concern assumptionRevenue recognition principleNo violationPeriodicity assumptionEconomic entity assumption c. Gomez, Inc. is…
What is the main criticism of LIFO? A. It presents a balance sheet figure that is out-of-date. B. It artificially creates a higher income. C. It utilizes a unit cost that has no evidence of existence. D. It is often complicated to implement, especially if inventory costs change frequently.
“In decision making, full (absorption) costing approach has become entirely useless as it leads to wrong decisions”. Provide examples and evaluate the statement.
Under which costing system non manufacturing costs will not be included in calculating product costs? a. Absorption costing and Variable costing systems. b. Variable costing system only. C. Absorption costing system only. d. Activity based costing system only. e. None of the given answers
ABC generally causes the least amount of cost distortion among products because indirect costs are allocated to the products based on
Briefly explain the potential negative consequences in pricing decisions from using a traditional, volumebased product-costing system.