We saw in Chapter 12 that a decentralized firm delegates decision-making authority to subordinates. With this delegation of authority comes the risk of managers making decisions based on their individual goals that can be sub-optimal for the organization as a whole. One example of dysfunctional decision-making occurs when business units or divisions within the organization buy goods and services from one another and each unit or division manager is evaluated on reported profits. In this chapter we address this potential problem. | Lecture Fundamentals of cost accounting - Chapter 15: Transfer pricing
