Answer
1. Lack of Cost Control Incentives: In this approach, the manager of the supplying division uses a cost-based method to record revenues, which may result in a lack of sufficient incentives for cost control.
2. Ambiguity in Decentralization Levels: The dual-pricing approach doesn't provide clear signals to division managers about the desired level of decentralization by top management. This can lead to confusion and misalignment in decision-making within the organization.
Work Step by Step
No steps.
