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Unformatted text preview: o Bad easily manipulated • RI o Good focus on achieving goals (less easy to manipulate) o Bad firm size matters Transfer Pricing • Transfer items between divisions within the company Selling Division (producer): TP = additional outlay cost per unit + opportunity cost per unit o TP >/= VC / unit + (CM lost from outsider / units sold to outsider) General transfer-pricing rule Excess capacity no opportunity cost No-excess capacity opportunity cost Some excess capacity some opportunity cost Buying division (buyer): TP </= price they can get from outsiders Market transfer price rule Negotiated transfer price o Combining both TP of selling and buying division Cost-based transfer price o Variable cost what we did above o Full Cost VC + allocated fixed overhead cost VC + budgeted fixed overhead / budgeted production • This is set to be TP...
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This note was uploaded on 02/18/2012 for the course BUSE 237 taught by Professor Sf during the Spring '12 term at Simon Fraser.
- Spring '12