• Standard costs rather than actual costs should be used in transfer-pricing methods because:

• standard costs facilitate a professionally negotiated, amicable settlement between the buying and selling divisions.

• inefficient producing divisions could pass on their inefficiencies to buying divisions in the transfer price.

• financial accounting rules (GAAP) require the use of standard costs.

• standard costs are more readily available than actual costs.

• tax rules require the use of standard costs.