First, the use of cost—particularly full cost—as a transfer price can lead to bad decisions and thus suboptimization. Return to the example involving the ginger beer. The full cost of ginger beer can never be less than £15 per barrel (£8 per barrel variable cost + £7 per barrel fixed cost at capacity). What if the cost of buying the ginger beer from an outside supplier is less than £15—for example, £14 per barrel? If the transfer price were set at full cost, then Pizza Maven would never want to buy ginger beer from Imperial Beverages because it could buy its ginger beer from an outside supplier at a lower price. However, from the standpoint of the company as a whole, ginger beer should be transferred from Imperial Beverages to Pizza Maven whenever Imperial Beverages has idle capacity.