The selling division may use a transfer price different from that used by the division buying the item being transferred in order to evaluate the performance of the managers.

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The selling division may use a transfer price that is different from the price used by the buying division in order to evaluate the managers' performance. This is because the selling division's objective may be to maximize their own profit, while the buying division's objective may be to minimize costs. Therefore, a transfer price that reflects the true market value may not necessarily align with each division's goals, which is why a different transfer price may be used for internal performance evaluation purposes.

The Selling Division May Use a Transfer Price Different from That