Which of the following is a disadvantage of dual pricing?

[lbcchick]

Question 1

The transfer-pricing method that reduces the goal-congruence problems associated with a pure cost-plus-based transfer-pricing method is the ________.
◦ dual pricing
◦ market pricing
◦ single pricing
◦ distress pricing

Question 2

Which of the following is a disadvantage of dual pricing?
◦ It strongly preserves the autonomy of divisions, and the division managers are motivated to put forth effort to increase the operating income of their respective divisions, causing inefficiencies.
◦ The price arrived by using dual pricing has no specific relationship to either costs or the market price.
◦ It insulates managers from the realities of the marketplace because costs, not market prices, affect the revenues of the supplying division.
◦ It assumes that the minimum transfer price equals the incremental cost per unit incurred up to the point of transfer minus the opportunity cost per unit to the selling division.

[EAN94]

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[lbcchick]

Thanks for the timely response, appreciate it

[lindahyatt42]

Gracias!