A DISADVANTAGE of a negotiated transfer price is that:
A)each division manager must put forth effort to increase division operating income
B)negotiated transfer price preserves divisional autonomy
C)negotiations usually require much time and energy
D)Both B and C are correct.

Question

Quizplus · Accepted Answer

Negotiations for a transfer price usually require a significant amount of time and energy, which can be a disadvantage. Option A is incorrect because it is not a disadvantage, but rather a potential advantage. Option B is incorrect because preserving divisional autonomy can be seen as an advantage, not a disadvantage. Option D is incorrect because only option C accurately identifies a disadvantage.

A DISADVANTAGE of a Negotiated Transfer Price Is That