Which of the following transfer-pricing methods can lead to dysfunctional decision-making behavior by managers?
A) Variable cost.
B) Full cost.
C) External market price.
D) A professionally negotiated, amicable settlement between the buying and selling divisions.
E) None of the answers is correct.

Question

Quizplus · Accepted Answer

Full cost transfer pricing can lead to dysfunctional decision-making because it may not reflect the true economic value or opportunity cost, potentially leading managers to make suboptimal decisions.

Which of the Following Transfer-Pricing Methods Can Lead to Dysfunctional