With a well-designed transfer price,each divisional manager makes the best decision for his or her subunit,while simultaneously ________ the profits of the firm.
A)prohibiting
B)eliminating
C)maximizing
D)minimizing
E)distributing

Question

Quizplus · Accepted Answer

A well-designed transfer price allows each divisional manager to make decisions that benefit their subunit, while also maximizing the profits of the overall firm. This means that the transfer price should be set at a level that incentivizes each subunit to make decisions that ultimately benefit the firm as a whole. Maximizing profits ensures that the firm is operating at its optimal level, which is the primary goal of any business.

With a Well-Designed Transfer Price,each Divisional Manager Makes the Best