Transfer pricing can cause unhappiness within a firm because:
A) the internal sellers want to sell items internally at low prices.
B) the internal buyers want to buy items internally at high prices.
C) the internal sellers want to sell items at higher prices than the internal buyers want to pay.
D) only government workers are happy.

Question

Quizplus · Accepted Answer

Transfer pricing can lead to disputes within a firm because internal sellers often want to sell their goods or services at higher prices to maximize their department's profit, while internal buyers prefer to purchase these goods or services at lower prices to minimize their costs. This discrepancy in pricing preferences can cause unhappiness and conflict within the organization. Choices A and B are incorrect because they misrepresent the desires of internal sellers and buyers, respectively. Choice D is unrelated to the concept of transfer pricing.

Transfer Pricing Can Cause Unhappiness Within a Firm Because