Explain the potential benefits of operating a transfer pricing system within a divisionalised company.
【参考答案及解析】
Potential benefits of operating a transfer pricing system within a divisionalised company (i) It can lead to goal congruence by motivating divisional managers to make decisions, which improve divisional profit and improve profit of the organisation as a whole. (ii) It can prevent dysfunctional decision making so that decisions taken by a divisional manager are in the best interests of his own part of the business, other divisions and the organisation as a whole. (iii) Transfer prices can be set at a level that enables divisional performance to be measured 'commercially'. A transfer pricing system should therefore report a level of divisional profit that is a reasonable measure of the managerial performance of the division. (iv) It should ensure that divisional autonomy is not undermined. A well-run transfer pricing system helps to ensure that a balance is kept between divisional autonomy to provide incentives and motivation, and centralised authority to ensure that the divisions are all working towards the same target, the benefit of the organisation as a whole.
Potential benefits of operating a transfer pricing system within a divisionalised company (i) It can lead to goal congruence by motivating divisional managers to make decisions, which improve divisional profit and improve profit of the organisation as a whole. (ii) It can prevent dysfunctional decision making so that decisions taken by a divisional manager are in the best interests of his own part of the business, other divisions and the organisation as a whole. (iii) Transfer prices can be set at a level that enables divisional performance to be measured 'commercially'. A transfer pricing system should therefore report a level of divisional profit that is a reasonable measure of the managerial performance of the division. (iv) It should ensure that divisional autonomy is not undermined. A well-run transfer pricing system helps to ensure that a balance is kept between divisional autonomy to provide incentives and motivation, and centralised authority to ensure that the divisions are all working towards the same target, the benefit of the organisation as a whole.