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Cost Accounting 101 Practice Test: Management Control Systems, Transfer Pricing, and Multinational Operations
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A management control system (MCS) is a framework that helps organizations compare their actual outcomes to their goals and objectives. MCSs can be formal or informal, and they gather and use information to evaluate the performance of different organizational resources. MCSs are used by businesses to understand how successfully they achieve goals related to productivity, profitability, or efficiency.  Transfer pricing is an accounting and taxation practice that allows for pricing transactions internally within businesses and between subsidiaries that operate under common control or ownership.... Show more
Cost Accounting 101 Practice Test: Management Control Systems, Transfer Pricing, and Multinational Operations
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25 Questions

1. An advantage of a negotiated transfer price is the:
2. Additional factors that arise in multinational transfer pricing include tariffs and customs duties levied on imports of products into a country.
3. A benefit of decentralization is that it creates better responsiveness to local needs.
4. ________ means minimum constraints and maximum freedom for managers at the lowest levels of an organization to make decisions and to take actions.
5. Decentralizaion can sometimes lead to suboptimal decisions.
6. A benefit of using a market-based transfer price is the:
7. The choice of a transfer-pricing method has minimal effect on the allocation of company-wide operating income among divisions.
8. Tax considerations should play no part in determining a transfer price between international divisions of a firm.
9. An advantage of using budgeted costs for transfer pricing among divisions is that:
10. Goal congruence exists when individuals work toward achieving one goal, and groups work toward achieving a different goal.
11. A(n) ________ is a binding agreement between a multinational and the United States Internal Revenue Service to obtain approval for a specific transfer price for a number of years.
12. The formal management control system includes:
13. Which of the following is NOT a characteristic of a management control system?
14. One of the problems in using one set of accounting records for tax reporting and another set of records for internal management reporting is:
15. Of the four perspectives of the balanced scorecard the customer perspective refers to employee satisfaction, absenteeism, information systems capabilities, and number of processes with real-time feedback.
16. Section 482 of the U.S. Internal Revenue Code governing the taxation of multinational transfer pricing recognizes that transfer prices can be:
17. Number of processes with real time feedback would be an example of a Balanced Scorecard control measure from a customer perspective.
18. When companies do NOT want to use market prices or find it too costly, they typically use ________ prices, even though suboptimal decisions may occur.
19. The degree of freedom to make decisions is:
20. One major advantage of negotiated transfer pricing is that it can be done with little time or effort.
21. A DISADVANTAGE of a negotiated transfer price is that:
22. Effort is defined as achievement of a goal.
23. Transfer prices should be judged by whether they promote:
24. A major advantage of using actual costs for transfer prices is that often inefficiencies are NOT passed along to the receiving division.
25. In a profit center, the manager is accountable for investments, revenues, and costs.

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