Transfer-pricing systems enable managers to focus on maximizing the performance of their subunits.

Question

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Transfer-pricing systems allow managers to create a framework for allocating costs and revenues among their subunits, enabling them to focus on maximizing their performance. By clearly defining accountability and providing incentives, these systems encourage managers to optimize their operations and contribute to the overall success of the organization. Without transfer-pricing systems, it may be difficult for managers to accurately measure the performance of their subunits and align their goals with those of the company as a whole.

Transfer-Pricing Systems Enable Managers to Focus on Maximizing the Performance