GHY has two subsidiaries. GHY-Motor manufactures car engines and GHY-Build designs and assembles cars. In the car industry it is common for manufacturers to buy parts, including engines, from other manufacturers. GHY has granted GHY-Motor and GHY-Build full autonomy. GHY-Build is considering using an engine from another company for a new model that it is designing. GYY-Motor has a suitable engine, but it charges more than GHY-Build's preferred supplier. Which of the following statements is correct? Select ALL that apply.
One of an investment centre's products is sold on an external market. Output is limited because the specialist machine that manufactures the product is operating at full capacity.
An organization has a decentralized structure in which division A supplies division B with an intermediate product for which there is no external market. Division B carries out further processing and then sells the final product on the external market. Due to organizational policy the current transfer pricing basis is variable cost. The manager of division A has stated, 'The current transfer price is unfair because it does not enable us to recoup our costs'. The manager of division B has stated, 'The current transfer pricing system enables us to quote competitive prices for the finished product'. The Chief Executive of the organization is considering imposing a transfer pricing policy that uses dual pricing. Dual pricing would: