Answer (D) is correct . Transfer prices are often used by profit centers and investment centers. Profit centers are the more fundamental of these two centers because investment centers are responsible not only for revenues and costs but also for invested capital.
Answer (A) is incorrect because A production center may be a cost center, a profit center, or even an investment center. Transfer prices are not used in a cost center. Transfer prices are used to compute profitability, but a cost center is responsible only for cost control.
Answer (B) is incorrect because An investment center is not as fundamental as a profit center.
Answer (C) is incorrect because Transfer prices are not used in a cost center.
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