An organization has a decentralized structure in which division A supplies division B with an...

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: