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Brent Co. has intracompany service transfers from Division Core, a cost center, to Division Pro, a profit center. Under stable economic conditions, which of the following transfer prices is likely to be most conducive to evaluating whether both divisions have met their responsibilities?
Suggested Answer: B
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A cost center is responsible for costs only. A profit center is responsible for costs and revenues. Hence, the transfer from the cost center must, by definition, be at a cost-based figure The transfer should be at standard variable cost so as to isolate any variance resulting from Core's operations. Assuming fixed costs are not controllable in the short run, the relevant variance is the difference between actual cost and the standard vanable cost.
12 comments · newest first
GA
Gail
11 months ago
Wait, are we sure actual cost is the best option? Sounds too simple.
RY
Ryan
12 months ago
Negotiated price could lead to bias in evaluations.
DE
Deja
12 months ago
Actual cost plus markup? Seems a bit excessive.
MY
My
12 months ago
I think standard variable cost makes more sense for evaluation.
MA
Margurite
1 year ago
Actual cost is the most straightforward.
DO
Donte
1 year ago
Actual cost plus markup seems like it could incentivize Division Core, but I wonder if it complicates the evaluation process too much.
LA
Laticia
1 year ago
I'm not so sure about that; I remember a practice question where standard variable cost was highlighted as a better measure for performance evaluation.
ME
Merri
1 year ago
I think actual cost might be the best option since it reflects the true expenses incurred by Division Core.
KI
Kizzy
1 year ago
I feel like negotiated price could lead to conflicts between divisions, but it might also encourage collaboration. It's tough to decide!
IS
Isaac
1 year ago
Templates could also be a good way to abstract vendor-specific resources, by providing a standardized interface for deploying cloud infrastructure. But I'm not as confident about that as I am about policies being the best answer.
AN
Annmarie
1 year ago
Wait, is it &target? I'm a bit confused about the difference between &syslast and &target in this context.
FL
Florinda
1 year ago
I'm pretty sure the answer is B. DISTINCT is used to remove duplicate rows from a result set, but I'm not 100% certain it can be used in a CREATE TABLE statement.