An advantage of using budgeted costs for transfer pricing among divisions is that ________.
A) overall corporate profitability is usually higher
B) it usually provides a basis for optimal decision making
C) the divisions know the transfer price in advance
D) it promotes subunit autonomy

Question

Quizplus · Accepted Answer

Budgeted costs provide a predetermined transfer price, which allows the divisions to plan and budget accordingly. This can reduce uncertainty and promote cooperation between the divisions. However, it may not necessarily result in optimal decision making or overall corporate profitability. It also does not necessarily promote subunit autonomy, as the transfer price may still be controlled by higher-level management.

An Advantage of Using Budgeted Costs for Transfer Pricing Among