Chapter 19- Strategic Performance
Measurement Investment Centers and
Transfer Pricing questions with answers.
Advance pricing agreement (APA) ANS -An agreemnt between the IRS and a firm that establishes an
agreed-upon tenasfer price
Arm's length standard ANS -A transfer price set to reflect the price that unrelated parties acting
independently would have set
Asset turnover (AT) ANS -The amount of sales dollars generated per dollar of investment; measure the
managers ability to increase sLes from a given level of investment
Comparable pricing method ANS -Established an arm's length transfer price by using the sales price of
similar products made by unrelated firms
Cost plus method ANS -Within the context of transfer pricing, a method that determines the price on
the selling unit's cost plus a gross profit percentage determined by comparing the seller's sales to those
of unrelated parties (or by comparing unrelated parties' sales to those of other unrelated parties)
Dual pricing ANS -Involves the use of multiple prices for an internal transfer or cost allocation, one
based on variable cost and one based on fixed cost
Economic value added (EVA) ANS -A measure of financial performance designed to approximate an
entity's economic profit; calculated most often as net operating profit after taxes (adjusted for
accounting distortions) less an imputed charge based on the level of invested capital
Expropriation ANS -A situations in which a government takes ownership and control of assets that a
foreign investor had invested in that country
Full cost method ANS -A transfer price set equal to the variable cost of the selling unit, plus an allocated
share of the selling unit's fixed costs, with or without a markup for profit
Measurement Investment Centers and
Transfer Pricing questions with answers.
Advance pricing agreement (APA) ANS -An agreemnt between the IRS and a firm that establishes an
agreed-upon tenasfer price
Arm's length standard ANS -A transfer price set to reflect the price that unrelated parties acting
independently would have set
Asset turnover (AT) ANS -The amount of sales dollars generated per dollar of investment; measure the
managers ability to increase sLes from a given level of investment
Comparable pricing method ANS -Established an arm's length transfer price by using the sales price of
similar products made by unrelated firms
Cost plus method ANS -Within the context of transfer pricing, a method that determines the price on
the selling unit's cost plus a gross profit percentage determined by comparing the seller's sales to those
of unrelated parties (or by comparing unrelated parties' sales to those of other unrelated parties)
Dual pricing ANS -Involves the use of multiple prices for an internal transfer or cost allocation, one
based on variable cost and one based on fixed cost
Economic value added (EVA) ANS -A measure of financial performance designed to approximate an
entity's economic profit; calculated most often as net operating profit after taxes (adjusted for
accounting distortions) less an imputed charge based on the level of invested capital
Expropriation ANS -A situations in which a government takes ownership and control of assets that a
foreign investor had invested in that country
Full cost method ANS -A transfer price set equal to the variable cost of the selling unit, plus an allocated
share of the selling unit's fixed costs, with or without a markup for profit
