Which of the following is the most significant disadvantage of a cost-based transfer price? (CIA adapted)
A) Requires internally developed information.
B) Imposes market effects on company operations.
C) Requires externally developed information.
D) May not promote long-term efficiencies.

Question

Quizplus · Accepted Answer

A cost-based transfer price may not promote long-term efficiencies because it does not reflect market conditions or incentivize divisions to control costs and improve performance.

Which of the Following Is the Most Significant Disadvantage of a Cost-Based