A problem with a cost-based transfer price is that it does NOT provide adequate incentive for the selling division to control costs.

Name: A problem with a cost-based transfer price is that it does NOT provide adequate incentive for the selling division to control costs.
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Question

Quizplus · Accepted Answer

Cost-based transfer pricing can lead to inefficiencies as the selling division may not be motivated to minimize costs since they can pass these costs onto the buying division.

A Problem with a Cost-Based Transfer Price Is That It