Transfer pricing-purposes, Managerial Accounting

Transfer Pricing

Transfer pricing can contribute directly to the process of departmental performance measurement and indirectly to the measurement of product performance.

A transfer price is a value attached to the output of a department in order to measure the value of its trade with other departments inside the organization. The transfer price of the supplying division is charged to the receiving division. Transfers prices do not affect overall organizational profit results but do affect the profits reported by divisions. The following example illustrates this point. Different transfer prices allocate profit in different ways between divisions and it should be clear that:

1) Transfer pricing shares profits between divisions but does not, on its own, affect total profits;

2) Transfer pricing can motivate managers to take actions to improve profits for their divisions and for the organization as a whole. The transfer price should allow the opportunity for effort to be translated into a positive measurement of performance.

Posted Date: 12/8/2012 5:10:47 AM | Location : United States

Related Discussions:- Transfer pricing-purposes, Assignment Help, Ask Question on Transfer pricing-purposes, Get Answer, Expert's Help, Transfer pricing-purposes Discussions

Write discussion on Transfer pricing-purposes
Your posts are moderated
Related Questions
1. Paid $350,000 to purchase furniture and leased it to DEF Corp. for 5 years. DEF agreed to pay $89,955 on July 1 for each of the next 5 years.  At the end of the lease term we ex

King Manufacturing has four categories of overhead. The four categories and expected overhead costs for each category for next year are as follows: Maintenance

Determine the Functions of management accounting: 1. Planning and forecasting: management fixes various targets to be achieved by the business in near future. Planning and fo

how to journalize entry. purchased $150,000 of raw materials on account, terms of 2/20; n/30

Problem 1 Management accounting is sensitive to management needs; however, it assists the management and does not replace it. Write down in detail the scope of management accou

Determine Cost pool and Cost drivers Cost pool: it is another name given to a cost centre and,  therefore an activity cost centre may also be termed as an activity cost pool.

based on your assumptions, calculate the cost per unit (total product cost on a per unit basis) under a traditional accounting system based on direct labor hours (table 1 prepared

On 1st January, 2005 the Board of Directors of Paushak Limited needed to identify the amount of working capital needed to meet the programme they have arranged for the year. From t

Intra company transfer pricing A company engaged in production may have several segments division or departments doing production jobs or manufacturing party or fully finished