The transfer pricing system operated by a divisional company has the potential to make a significant?contribution towards the achievement of corporate financial objectives.?
Required?
Explain the potential benefits of operating a transfer pricing system within a divisionalised company.?
Potential benefits of operating a transfer pricing system within a divisionalised company include the?following.?
(a) It can lead to goal congruence by motivating divisional managers to make decisions, which?improve divisional profit and improve profit of the organisation as a whole.?
(b) It can prevent dysfunctional decision-making so that decisions taken by a divisional manager are?in the best interests of their own part of the business, other divisions and the organisation as a?whole.?
(c) Transfer prices can be set at a level that enables divisional performance to be measured?'commercially'. A transfer pricing system should therefore report a level of divisional profit that is a?reasonable measure of the managerial performance of the division.?
(d) It should ensure that divisional autonomy is not undermined. A well-run transfer pricing system?helps to ensure that a balance is kept between divisional autonomy to provide incentives and?motivation, and centralised authority to ensure that the divisions are all working towards the same?target; the benefit of the organisation as a whole.?
多做幾道
Fill in the blanks.?
?Ideally, a transfer price should be set that enables the individual divisions to maximise their profits at a?level of output that maximises ……………………. .?
?The transfer price which achieves this is unlikely to be a ……………….. transfer price or a?……………. transfer price.??
?If optimum decisions are to be taken, transfer prices should reflect …………………. .?
There are two profit centres, A and B. Profit centre A transfers a product to profit centre B, but?could also sell the product in an external market at a price of $30. The marginal cost of making the?product in profit centre A is $8 per unit and the full cost is $14 per unit. There would be a variable?cost of $1 per unit for sales and distribution to customers in the external market, but no such costs?for internal transfers.?
To avoid disputes between the profit centre managers, what should be the transfer price for the?product??
$ _______
What objectives might the following not for profit organisations have??
(a) An army? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? (d) A political party?
(b) A local council? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ?(e) A college?
(c) A charity?
One of the objectives of a local government body could be 'to provide adequate street lighting throughout?the area'.?
(a) How could the 'adequacy' of street lighting be measured??
(b) Assume that other objectives are to improve road safety in the area and to reduce crime. How?much does 'adequate' street lighting contribute to each of these aims??
(c) What is an excessive amount of money to pay for adequately lit streets, improved road safety and?reduced crime? How much is too little??
What general objectives of non profit seeking organisations are being described in each of the following??
(a) Maximising what is offered?
(b) Satisfying the wants of staff and volunteers?
(c) Equivalent to profit maximisation?
(d) Matching capacity available?
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