Paramount Medical Services has two outpatient clinics and a pathology laboratory, which are organized as separate profit centers. When the pathology laboratory conducts tests ordered by the clinics, the clinics are charged the basic market price of the tests. The managers of the clinics object to this practice and argue that because they are all part of the same company, they should be charged for the cost of the procedures rather than market price.
Required:
Support the use of market prices or cost-based prices for charging clinics for tests performed by the pathology laboratory.