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An organization is comprised of two divisions. One of the divisions manufactures a product that it sells both to an imperfect external market and to the other division.

The organization wishes to establish the most suitable basis for the transfer price for this product and is considering either a negotiated transfer price or a market-based transfer price.

Which of the following statements is correct?

Options:

A negotiated transfer price could help to overcome the problem of establishing a single price for this external market.

A single market price for all of the division's output can be determined easily whereas a negotiated transfer price may result in protracted negotiations.

A negotiated transfer price will always result in goal congruence whereas this is not always true when using a single market-based transfer price.

A market-based transfer price will ensure both divisional autonomy and goal congruence because part of the division's output is sold to the external market.

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Question 2

An organization wants to increase the use value that customers place on one of its products - a laptop computer.

Which of the following actions, taken to increase the value to the customer, would increase the product's use value?

Select ALL that apply.

Options:

Launching a marketing campaign designed to build the company's brand.

Installing a touch screen to improve the computer's functionality.

Changing the color of the computer's case.

Adopting a premium pricing strategy for the computer.

Fitting advanced components to improve the computer's performance.

Question 3

A company has a cost of capital of 12% and a maximum of $20 million to invest. It has identified three possible investment projects, none of which is divisible, as follows.

Which project(s) should the company invest in?

Options:

Project 1 only

Project 2 only

Project 3 only

Projects 1 and 3 only

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