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?

• A.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.
• B.A negotiated transfer price could help to overcome the problem of establishing a single price for this external market.
• C.A negotiated transfer price will always result in goal congruence whereas this is not always true when using a single market-based transfer price.
• D.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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Company TTM has the opportunity to invest $60,000 in a project. The project is anticipated to produce annual returns of $12,500 each year for 8 years. The cost of capital is 12%.
What is the net present value of the project? Give your answer to the nearest whole number.

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Using the Value Chain model for a manufacturing company, place the correct primary activity classification against each of the activities described.

Correct Answer:

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SDF is a newly-established production company that is experiencing high staff turnover in its factory.
The production department is studying the manufacturing process and its associated learning curve.
Which of the following statements is correct?

• A.SDF's staff turnover will disrupt the observation and measurement of the learning curve.
• B.SDF's rapid staff turnover means that knowledge of the learning curve has little value.
• C.SDF's staff turnover will affect the learning curve.
• D.SDF can use the learning curve to determine labor budgets for the remainder of the first year of operation.

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The discount rate at which the net present value (NPV) is zero is known as the

• A.internal rate of return
• B.breakeven point
• C.risk adjusted discount rate
• D.accounting rate of return

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