Safety Training
One task of Mega Manufacturing's Human Resource Department is to perform periodic safety training at Mega's various plants. HR is run as a profit center with each plant manager paying for this safety training via a transfer price. Recently, some of the plant managers have been hiring outside firms for their safety training. HR has complained to corporate that they will have to lay off staff if this continues but the plant managers reply that they are maintaining their acceptable safety record at a lower cost. What does this imply about the transfer price?