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Management Control Systems and Transfer Pricing 1. A perfectly competitive market exists when which of the following conditions are present? a. Individual buyers or sellers can affect prices by their own actions. b. Market prices reach well above their historical averages due to demand outstripping supply c. Market prices drop well below their historical averages due to supply outstripping demand d. There is a homogeneous product with buying prices equal to selling prices a. None of the above. 2. A benefit of using a market-based transfer price is that the a. profits of the transferring division are sacrificed for the overall good of the corporation b. profits of the division receiving the products are sacrificed for the overall good of the corporation c. economic viability and profitability of each division can be evaluated individually d. transferring division can be assured of recovering its full costs in all scenarios e. None of the above. a. buyer will not willingly purchase a product for less than the incremental costs incurred to b. seller will not willingly sell a product for less than the incremental costs incurred to make In analyzing transfer prices, the: manufacture the product internally the product c. buyer will willingly pay more than the ceiling transfer price. d. buyer will not pay less than the ceiling transfer price. e. None of the above

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