_____ exists when divisions, acting in their own best interests, set transfer prices or make decisions based on transfer prices that are not in the best interest of the organization as a whole.

Question

Quizplus · Accepted Answer

Suboptimization occurs when divisions prioritize their own goals over the overall goals of the organization. This can happen when divisions set transfer prices based on their own interests rather than what is best for the organization as a whole. Centralization refers to a concentration of decision-making power at the top of the organization, while decentralization refers to delegating decision-making power to lower levels. Decision support refers to the tools and systems used to assist decision-making. None of these options directly relate to the issue of suboptimization through transfer pricing.

_____ Exists When Divisions, Acting in Their Own Best Interests