Transfer Prices Should Not Be Based on Actual Costs Because

Multiple Choice

Transfer prices should not be based on actual costs because:

A) inefficient producing divisions have higher costs of production, which would be passed on by buying divisions.
B) producing divisions have no incentives to control costs.
C) inefficient units with high costs of production have no opportunity for profit.
D) inefficient producing divisions have higher costs of production, which would be passed on by buying divisions AND producing divisions have no incentives to control costs.