Determining costs and prices is easier when organizations are split into separate profit centres selling onto other divisions within the same company-especially when these adopt inefficient transfer pricing mechanisms.

Question

Quizplus · Accepted Answer

Splitting organizations into separate profit centers and using inefficient transfer pricing mechanisms can actually complicate the process of determining costs and prices, as it may lead to arbitrary cost allocations and potentially distort the economic reality of transactions within the company.

Determining Costs and Prices Is Easier When Organizations Are Split