Chapter 13-

-Responsibility Accounting
and Transfer Pricing in Decentralized Organizations
COMPLETION

1. The transfer of authority, responsibility, and decision-making rights from the top
to the bottom of an organization is referred to as ___________________________.

ANS: decentralization

2. In a decentralized organization, the cost objective is referred to as a

_____________________.

ANS: responsibility center

3. The accounting practices that are practiced by a decentralized organization are

referred to as ___________________________.

ANS: responsibility accounting

4. A responsibility center in which a manger has only the authority to control cost is
referred to as a(n) ________________________________.

ANS: cost center

5. An organizational unit whose manager is solely responsible for generating

revenues is referred to as a ________________________________.

ANS: revenue center

6. A responsibility center whose manager is responsible for generating revenues and

controlling expenses is referred to as a ________________________.
ANS: profit center

7. An organizational unit whose manager is responsible for acquiring, using, and

disposing of assets in order to maximize return on assets is referred to as a(n)
______________________.

ANS: investment center

8. A situation in which managers pursue goals and objectives that are in the best
interests of a particular segment rather than in the best interests of the organization as a whole is
referred to as ________________________________.

ANS: suboptimization

9. An organizational unit that provides specific tasks for other internal units is
referred to as a(n)________________________________.

ANS: service department

10. An organizational unit that performs management activities, such as personnel

services, that benefit the entire organization is referred to as a(n)
_____________________________.

ANS: administrative department

 
11. When one responsibility center uses a transfer price to transfer goods or services
to another responsibility center a ___________________________ is created.

ANS: pseudo-profit center

12. Three types of transfer prices are ________________________,

______________________, and ________________________.
ANS: cost based, market based, and negotiated

13. A binding contract between a company and one or more national taxing
authorities that provides the details of how transfer prices will be set is referred to as a(n)
________________________________.

ANS: advance pricing agreement