Which of the Following Is a Disadvantage of Using a Negotiated

Multiple Choice

Which of the following is a disadvantage of using a negotiated transfer price instead of a cost-based transfer price?

A) It reflects underlying opportunity costs associated with producing goods.
B) It encourages managers to sell products for less than variable costs.
C) It will allow one division to generate a large contribution margin and the other to generate no contribution margin.
D) The transfer price may reflect negotiating skills of subunit managers.