ECONOMICS

Detailed explanation-1: -Is simple and predictable: It sets the pricing at the total production cost, meaning that selling divisions cannot realize any profits, and the buying division already is aware of the pricing based on how much it cost to make.

Detailed explanation-2: -In cost-based transfer pricing, only one subsidiary pays the cost to produce the goods that it purchased from another subsidiary. This maximizes profits for one part of the firm, but destroys them for the other.

Detailed explanation-3: -The main advantage of cost-plus pricing is that it is simple and straightforward. This pricing strategy is easy to understand and implement, since it involves adding a markup or fixed percentage to the cost of the product or service to arrive at the sale price.