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