Which of the following is a key problem with the use of market-based transfer prices?
A) It does not take into account the saving in cost (e.g. selling expenses, collection expenses) because of transferring internally.
B) It leads to decision making that is suboptimal for the firm.
C) It does not promote divisional autonomy.
D) It does not show the contribution of each division to overall profit.

Question

Quizplus · Accepted Answer

Market-based transfer prices do not account for cost savings from internal transfers, such as reduced selling and collection expenses, which can lead to inefficiencies.

Which of the Following Is a Key Problem with the Use