1.

The primary objective in setting transfer prices is to

A.

maximize profits for the company as a whole.

B.

maximize profits for the selling division.

C.

maximize profits for the purchasing division.

D.

minimize the cost to the purchasing division.

2.

If a company allows division managers to negotiate a cost-based transfer price, it is better to use actual costs rather than standard costs. Otherwise, the selling division has no motivation to control costs.

True

False