Lecture 4 Alb 2015
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Transcript of Lecture 4 Alb 2015
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ACCT30002 Topic 4
Pricing internal transfers
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Admin
Assignment
Test
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Theme
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References and readings
Eldenburg et al 2010, chapter 17
Langfeld-Smith et al 2010 chapter 12 Simons, 2000, ch 8 pp1! " 170#
$ilton !e ch 1%
&himani et al e ch 18
Eccles, '# 1!8%, ()ontrol *ith +airness in trans+er pricing,$arard &usiness 'eie*, .oember-/ecember, pp 1! 11#
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Objectives
utline *h3 trans+er pricing matters in
organisations )alculate trans+er prices using di4erent trans+er
pricing methods
5ien certain data, calculate the most suitabletrans+er price to achiee goal congruence
E6plain the adantages and limitations o+ the+ollo*ing trans+er pricing methods cost-based,maret-based, negotiated and dual9 and identi+3their suitabilit3 in particular settings
E6plain the in:uence o+ the leel o+ aailablecapacit3 broadl3 and in specifc settings *ithrespect to trans+er pricing decisions
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;h3 *ould trans+er pricing matter
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@anagers o+ten negotiate among themselessome satis+actor3 trans+er price +ten used to ensure euit3 bet*een diisions
"ost used as a starting point
Sometimes used *hen maret price unaailable orproduction costs are unstable
@anagers ma3 *or out oerall proft to frm o+ their(Doint product, and share the proft
.egotiated Trans+er Crices
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D#a& transfer prices
Bnder dual trans+er pricing
The purchaser records the transaction and oneprice and the seller records the transaction at adi4erent price#####an3 di4erence can be *ritten o4to a corporate account#
Bnder this method, tensions bet*een the diisionsor *or units ma3 be reduced but as *e *ill see in;orshops, dont al*a3s produce decisions in thebest interests o+ the frm#
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Appropriate Trans+er Crices
)ost based %H
@aret based 2H
.egotiated 17H
+ hi b
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Some +actors to thin about
Organisational structure##cost centreIproftcentreIinestment centreis the structure anduse o+ Iclassifcation o+, responsibilit3 centres+easible ' is it simpl3 creating problems