Different transfer prices may be used by the selling and buying divisions to avoid problems between the managers of the divisions.

Question

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Different transfer prices may be used by the selling and buying divisions to avoid conflicts or disagreements between the managers of the divisions. This can happen when the divisional managers have different performance goals or incentives, and using the same transfer price may not be beneficial for both divisions. By using different transfer prices, the managers can negotiate and agree on a price that is acceptable to both divisions and does not compromise their individual objectives.

Different Transfer Prices May Be Used by the Selling and Buying