What Is the Primary Problem with Using Discretionary Transfer Prices

question 19

Multiple Choice

What is the primary problem with using discretionary transfer prices to minimize costs in a decentralized organization?

• A) They don't really minimize tax costs.
• B) The appropriate transfer price to minimize costs cannot be determined by the parent company.
• C) The benefits of decentralization may be lost.
• D) They are extremely difficult to administer.

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Definitions:

Frequency Distribution

A summary of how often different values occur within a dataset, often represented in a table or graph.

Quantitative Data

Numerical data that quantifies an object or event, which can then be subjected to statistical analysis.

Range

The difference between the highest and lowest values in a set of data.

Stacked Bar Chart

A bar chart in which each bar is broken into rectangular segments of a different color showing the relative frequency of each class in a manner similar to a pie chart.