Question: a. A senior manager argues that the chip division's main purpose is to serve the firm's final-product divisions. Accordingly, these services should be offered free

a. A senior manager argues that the chip division's main purpose is to serve the firm's final-product divisions. Accordingly, these services should be offered free of charge; that is, the transfer price for chips should be PT = 0. Explain carefully what is wrong with this argument.
b. Suppose the chip division treats the copier division as it would an outside buyer and marks up the transfer price above marginal cost. Explain what is wrong with this strategy?

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a Facing P T 600 the copier divisions profit is A R A C A 600Q 4000Q ... View full answer

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