Which of the following is a problem with the use of cost-based transfer pricing?
A) It does not lead to optimal decisions for the firm.
B) There are many definitions of cost-based transfer pricing.
C) There are potential goal-congruence problems.
D) It does not lead to optimal decisions for the firm AND there are potential goal-congruence problems.

Question

Quizplus · Accepted Answer

Cost-based transfer pricing can lead to suboptimal decisions for both the selling and buying divisions, as they may not have the same cost structures or market conditions. Additionally, it can create potential goal-congruence problems, where one division may try to manipulate their costs to benefit themselves at the expense of the other division. Therefore, choice D is the correct answer as it includes both of these issues.

Which of the Following Is a Problem with the Use