For each transfer pricing method identified, match the appropriate strength and weakness.

Obj. 7 Transfer pricing method

a. Cost-based

b. Market-based

c. Negotiated Strength or weakness 1. Easy to apply 2. Takes management time to help settle disputes 3. Requires time and effort because external bids must be obtained and evaluated 4. Performance may be affected by negotiating skills rather than by a manager's ability to control costs 5. Does not encourage and reward efficiency 6. Forces managers to be as cost-efficient as the best competitor 7. Encourages dialogue among division managers