A transfer pricing method should lead to which of the following results?
A) managers always acting in their own best interest
B) managers acting in their own best interest and their decisions being in the long-term best interest of the manager's subunit
C) managers acting in their own best interest and their decisions being in the long-term best interest of the company
D) managers acting in their own best interest and their decisions being in the short-term best interest of the company
E) managers competing with each other

Question

Quizplus · Accepted Answer

A transfer pricing method should lead to managers acting in their own best interest while also making decisions in the long-term best interest of the company. This is because transfer pricing methods are used to allocate costs and revenues between different subunits of a company, and if managers only act in their own short-term interest, it can lead to suboptimal decisions and negatively impact the overall performance of the company. Therefore, the transfer pricing method should incentivize managers to make decisions that benefit their subunit but also contribute to the long-term success of the company as a whole.

A Transfer Pricing Method Should Lead to Which of the Following