Cost-based transfer prices are easy to implement but can lead to ________ decisions.
A) questionable
B) negotiated
C) dysfunctional
D) autonomous

Question

Quizplus · Accepted Answer

Cost-based transfer prices can lead to dysfunctional decisions because they do not take into account the market price or demand for the product or service being transferred. This can lead to suboptimal decisions such as overproduction or underinvestment in the transferred product or service, as the transfer price does not incentivize the receiving division to maximize profits. Alternatively, negotiated transfer prices or other methods that consider market factors can lead to more effective, strategic decisions.

Cost-Based Transfer Prices Are Easy to Implement but Can Lead