Champion Chemical Company has a number of divisions that produce and market paints, varnishes, and other chemical
Question:
Eduardo Sanchez, the container plant manager, has approached the corporate executive committee with the suggestion that the plant he administers be organized as a profit center. This would be accomplished by changing the transfer price to be equal to full cost plus a markup of 10 percent.
Required
Comment on Eduardo’s suggestion. Could his proposal lead to suboptimal decisions from the standpoint of the company as a whole?
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