Requirement $4.$ Determine two problems that may arise if

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implements the dual transfer prices described in requirement $2.$

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It may reduce the incentives of the supplying division to control costs since the costs are transferred out at a higher amount than the actual costs incurred.

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Yes

No

It does not insulate the harvesting division manager from the frictions and the discipline of the marketplace because$$ costs, not market$$ prices, affect the revenues of the supplying division.

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Yes

No

A dual$$ transfer$-$pricing system does not provide clear signals to the individual divisions about the level of decentralization top management seeks.