The full cost plus a markup transfer-pricing method can sometimes lead to goal incongruence.

Question

Quizplus · Accepted Answer

The full cost plus a markup transfer-pricing method can sometimes lead to goal incongruence because it encourages the selling division to inflate costs in order to receive a higher transfer price, while the buying division may try to negotiate a lower transfer price to reduce costs. This can lead to conflicts between the two divisions and may not align with the overall goals of the company.

The Full Cost Plus a Markup Transfer-Pricing Method Can Sometimes