AIP 6.9 Transfer Prices and Changing from a Cost to a Profit Center LO 2, 5

Northern Blue Company has manufacturing plants and retail shops. The retail shops purchase products from the manufacturing plants. Currently, the manufacturing plants are operated as cost centers and only supply the company's retail shops. The transfer price is cost-based and the retail shops operate as profit centers. The company president

is considering an increase in manufacturing capacity that will allow sales to customers outside the organization. The president plans to make the manufacturing plants profit centers.

Questions

a. Why are the managers of the retail shops unhappy with these new plans?