Lsquolsquoan action that is optimal for a division may not


1. ‘‘An action that is optimal for a division may not be optimal for the company as a whole.'' Explain.

2. Why are transfer prices necessary?

3. In what sense is the word price in the term transfer price a misnomer?

4. Refer to this chapter's Managerial Application ‘‘Just-in-Time Production in Japan and the Internal Revenue Service in the United States.'' Why did the Internal Revenue Service dispute the transfer prices? Did the IRS want the prices set higher or lower? Why?

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Finance Basics: Lsquolsquoan action that is optimal for a division may not
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