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Ch13 Responsibility Accounting and Transfer Pricing in Decentralized Organizatio
Ch13 Responsibility Accounting and Transfer Pricing in Decentralized Organizatio
Chapter 13
Responsibility Accounting
and Transfer Pricing
in Decentralized Organizations
Learning Objectives (1 of 2)
Compare Plan
Gather
actual
Managerial data
influence
Compare
Responsibility Accounting
• Direct method
• Step method
– Benefits-provided ranking
• Algebraic method
– Simultaneous equations
Service Cost Allocation
• Allocated service department costs are
included in the overhead application rate for
the revenue-producing areas
• Service department costs are allocated to
products or jobs through normal overhead
assignment procedures
Transfer Pricing
Internal charges for the exchange of goods or
services within the organization
• Promote goal congruence
• Make performance evaluation among segments
more comparable
• Transform a cost center into a pseudo- profit
center
• For internal use only
– Eliminated on external financial reports
• Encourages managers to be
entrepreneurial
Transfer Pricing Systems
• May cause disagreement among managers
• Add costs and take time
• May not work for all departments
• May cause dysfunctional behavior
• May cause underutilization or
overutilization of services
• Complicate tax planning
for multinationals
Multinational Transfer Pricing