A. Inefficiencies are charged to the department that is receiving, not transferring, the goods.

B. The basic issue of transfer prices is how much should one unit of a company charge another unit of the same company for its goods or services. The goal in setting a transfer price is that the method used will stimulate the department managers to do what will provide the greatest benefit to the company as a whole, rather than to act in their own interest. Transfer price based on actual cost does not motivate managers to use resources more efficiently which can lead to suboptimal decisions for the company as a whole.

C. Cost-based transfer price provide clarity and administrative convenience.

D. In cost-based transfer pricing, costs do not need to be adjusted by any markup.