Tom & Jerry are running Hanna Barbera's lemonade stand as two profit centers.Tom makes the lemonade while Jerry sells it.Jerry argues that Tom is transferring the lemonade to him priced too high,which forces him to charge the customers a high price,losing sales.Does the decision maker have the incentive to make a good decision?
A)Yes,because it increases the division profit
B)No,because it decreases division profit
C)Yes,because it does not affect division profit
D)No,because it increases company-wide profit

Question

​Tom & Jerry are running Hanna Barbera's lemonade stand as two profit centers.Tom makes the lemonade while Jerry sells it.Jerry argues that Tom is transferring the lemonade to him priced too high,which forces him to charge the customers a high price,losing sales.Does the decision maker have the incentive to make a good decision?
A)​Yes,because it increases the division profit
B)No,because it decreases division profit
C)Yes,because it does not affect division profit
D)​No,because it increases company-wide profit

Quizplus · Accepted Answer

The decision maker does not have the incentive to make a good decision because the high transfer price decreases the division profit by reducing sales due to high customer prices.

​Tom & Jerry Are Running Hanna Barbera's Lemonade Stand as Two

Tom & Jerry Are Running Hanna Barbera's Lemonade Stand as Two