1.Explain the effect on transfer prices on:

a.The performance evaluation of buying and selling divisions.

b.The selling division managers' incentives to sell goods either internally or externally.

2. Identify two main advantages and two behavioural implications of the use of the

following transfer pricing methods:

a. Market Based Transfer Price

b. Standard Cost Based Transfer Price

Note:There should be four advantages and four behavioural implications in total, i.e. each transfer pricing method will have two disadvantages and two behavioural implications.