1) In general, negotiated transfer prices will fall in a range between the selling division's relevant costs and the market price the buying division would need to pay if they were buying externally.

True

False

2)The Raisin Division of Trail Mix Foods, Incorporated had the following operating results last year from selling raisins to external customers:

Revenue (100,000 pounds of raisins)	$80,000
Variable expenses	37,500
Contribution margin	42,500
Fixed expenses	12,500
Profit	$30,000

Raisin expects identical operating results this year.

Assume that the Raisin Division is currently operating at its capacity of 100,000 pounds of raisins. Also assume that the Peanut Division wants to purchase 20,000 pounds of raisins from the Raisin Division. Under these conditions, what amount per pound of raisins would the Raisin Division have to charge the Peanut Division in order to maintain its current profit?

Group of answer choices

$0.80 per pound.

$0.30 per pound.

$0.425 per pound.

$0.50 per pound.

3)Multinational firms often face conflicting pressures when developing transfer pricing policies. These multinational firms could try to avoid taxes by using which of the following strategies?

Group of answer choices

A)use cost-based transfer prices instead of negotiated market transfer prices in low tax-rate countries.

B)use cost-based transfer prices instead of market transfer prices in high tax-rate countries.

C)use inflated transfer prices to reduce the profits of divisions in high tax-rate countries.

D)use inflated transfer prices to reduce the profits of divisions in low tax-rate countries.

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

Group of answer choices

A)charge inefficiencies to the department that is receiving the goods.

B)the actual cost to make an item is often not easily available.

C)are confusing and difficult to administer.

D)charge inefficiencies to the department that is transferring the goods.