Which of the Following Is a Key Problem with the Use

question 68

Multiple Choice

Which of the following is a key problem with the use of market-based transfer prices?

• A) It does not take into account the saving in cost (e.g. selling expenses, collection expenses) because of transferring internally.
• B) It leads to decision making that is suboptimal for the firm.
• C) It does not promote divisional autonomy.
• D) It does not show the contribution of each division to overall profit.

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Definitions:

Reactance

A psychological response where individuals act in opposition to external pressures or constraints to maintain their freedom of choice.

Loss of Freedom

The experience of having one's autonomy, choices, or rights restricted or removed, often leading to feelings of constraint or oppression.

Distressed

A state of emotional strain typically resulting from difficult or adverse situations.

Options

Choices or alternatives available in any situation, allowing for decision-making based on preferences, needs, or desired outcomes.