ResponsibilityCentersandTransferPricing(英文版)

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1、Decentralization,Responsibility Centers,and Transfer PricingCentralization and Decentralization SpectrumHigh degree of delegation of duties,power,and authority to lower levels of the organizationHigh degree of retention of duties,power,and authority by top managementDecentralizedCentralizedNeither c

2、entralization nor decentralization is necessarily a desirable organizational goal!Decentralization in OrganizationsBenefits ofDecentralizationTop managementfreed to concentrateon strategy.Lower-level managersgain experience indecision-making.Decision-makingauthority leads tojob satisfaction.Lower-le

3、vel decisionoften based onbetter information.Improves ability toevaluate managers.Decentralization in OrganizationsDisadvantages ofDecentralizationLower-level managersmay make decisionswithout seeing the“big picture.”May be a lack ofcoordination amongautonomousmanagers.Lower-level managersobjectives

4、 may notbe those of theorganization.May be difficult tospread innovative ideasin the organization.Decentralization and Segments A is any part or activity of an organization about which a manager seeks cost,revenue,or profit data.A segment can be.Quick MartAn Individual StoreA Sales TerritoryA Servic

5、e CenterCost,Profit,and Investments CentersCost Center A segment whose manager has control over costs,but not over revenues or investment funds.CostCostCostCost,Profit,and Investments CentersProfit Center A segment whose manager has control over bothcosts and revenues,but no control over investment

6、funds.RevenuesSalesInterestOtherCostsMfg.costsCommissionsSalariesOtherCost,Profit,and Investments CentersInvestment Center A segment whose manager has control over costs,revenues,and investments in operating assets.Corporate HeadquartersCost,Profit,and Investments CentersResponsibilityCenterCostCent

7、erProfitCenterInvestmentCenterCost,profit,and investmentcenters are allknown asresponsibilitycenters.Return on Investment(ROI)FormulaCash,accounts receivable,inventory,plant and equipment,and otherproductive assets.Income before interestand taxes(EBIT)Return on Investment(ROI)Formula$30,000$200,000=

8、ROI=Controlling the Rate of ReturnControlling the Rate of ReturnlRegals manager was able to increase sales to$600,000 which increased net operating income to$42,000.lThere was no change in the average operating assets of the segment.Return on Investment(ROI)Formula Net operating income Net operating

9、 income Sales Sales Sales Salesaaaaaaaaaaaaaaaaaa Average operating assetsAverage operating assetsROI =ROI =$42,000$600,000$600,000$200,000We can modify our original formula slightly:ROI =ROI =We increased ROI from 15%to 21%MarginTurnoverCriticisms of ROIIn the absence of the balancedscorecard,manag

10、ement maynot know how to increase ROI.Managers often inherit manycommitted costs over whichthey have no control.Managers evaluated on ROImay reject profitableinvestment opportunities.The Balanced ScorecardManagement translates its strategy into performance measures that employees understand and acce

11、pt.PerformancemeasuresFinancialCustomersLearningand growthInternalbusinessprocessesCriticisms of ROIlAs division manager at Winston,Inc.,your compensation package includes a salary plus bonus based on your divisions ROI-the higher your ROI,the bigger your bonus.lThe company requires an ROI of 15%on

12、all new investments-your division has been producing an ROI of 30%.lYou have an opportunity to invest in a new project that will produce an ROI of 25%.Criticisms of ROIAs division manager,I wouldnt invest inthat project becauseit would lower my pay!Criticisms of ROIGee.I thought we weresupposed to d

13、o what was best for the company!Residual Income-Another Measure of PerformanceNet operating incomeabove some minimumreturn on operatingassetsResidual IncomelA division of Zepher,Inc.has average operating assets of$100,000 and is required to earn a return of 20%on these assets.lIn the current period

14、the division earns$30,000.Residual IncomeOperating assets100,000$Required rate of return20%Required return20,000$Actual return30,000$Required return(20,000)Residual income10,000$Motivation and Residual Income Company As return on investment(ROI)is:A)36%.B)20%.C)15%.D)4%.The following information is

15、available on Company A:Sales$900,000Net operating income 36,000Stockholders equity 100,000Average operating assets 180,000Minimum required rate of return15%The following data are available for the South Division of Redride Products,Inc.and the single product it makes:Unit selling price$20Variable co

16、st per unit$12Annual fixed costs$280,000Average operating assets$1,500,000 How many units must South sell each year to have an ROI of 16%?A)240,000.B)1,300,000.C)65,000.D)52,000.All other things equal,a companys return on investment(ROI)would generally increase when:A)sales decrease.B)average operat

17、ing assets increase.C)operating expenses increase.D)operating expenses decrease.TRANSFER PRICINGA transfer price is the price charged when one segment(for example,a division)provides goods or services to another segment of the same company.TRANSFER PRICING Some Points Transfer prices are necessary t

18、o calculate costs in a cost,profit,or investment center.The purchasing division will naturally want a low transfer price and selling division will want a high transfer price.From the standpoint of the firm as a whole,transfer prices involve“taking money out of one pocket and putting it into the othe

19、r.”An optimal transfer price is one that leads division managers to make decisions that are in the best interests of the firm as a whole.Production capacity(number of batteries)300,000Selling price per battery to outsiders$40Variable costs per battery$18Fixed costs per battery(based on capacity)$7 B

20、arker Company has a Vehicle Division that could use this battery in its forklift trucks.The Vehicle Division would like to buy 50,000 batteries per year.It is presently buying these batteries from an outside supplier for$39 per battery.EXAMPLE:The Battery Division of Barker Company makes a standard

21、12-volt battery.BatteryDivisionSelling price:$40Purchase price:$39Transfer Price:?VehicleDivisionOutsideMarketforVehicleBatteriesForkliftTrucksFrom the standpoint of the entire company,no transfer should take place since the company gives up$40 in revenues,but saves only$39 in costs.TransferpriceVar

22、iablecost+Total contributionmargin on lost sales Number of units transferredTransferprice$18+($40$18)50,000 50,000$18 ($40$18)=$40Transferprice Cost of buying from outside supplier=$39Suppose the Battery Division is operating at capacity.What is the lowest acceptable transfer price from the viewpoin

23、t of the selling division?But,the purchasing division will not pay more than$39,the cost from buying the batteries from the outside.So the two managers will not be able to agree to a transfer price and no transfer will voluntarily take place.Assume again that the Battery Division is operating at cap

24、acity,but suppose that the division can avoid$4 in variable costs,such as selling commissions,on intracompany sales.What is the lowest acceptable transfer price from the viewpoint of the selling division?TransferpriceVariablecost+Total contributionmargin on lost sales Number of units transferredTran

25、sferprice$18$4+($40$18)50,000 50,000$36Once again,the purchasing division will not pay more than$39,the cost from buying the batteries from the outside.In this case an agreement is possible.Any transfer price within the range$36 Transfer price$39 From the standpoint of the entire company,this transf

26、er should take place since the cost of the transfer is$36 and the company saves$39,for a net gain of$3.COST-BASED TRANSFER PRICES lTransfer prices based on cost are easily understood and convenient to use and do not require negotiation.lUnfortunately,cost-based transfer prices have several disadvant

27、ages:vCost-based transfer prices can lead to bad decisions.(For example,they dont include opportunity costs from lost sales.)vThe only division that will show any profit on the transaction is the one that makes the final sale to an outside party.vCost-based transfer prices provide no incentive for c

28、ontrol of costs unless transfers are made at stan-dard cost.MARKET-BASED TRANSFER PRICESlWhen there is an active market for the item being transferred,the market price may be a suitable transfer price.lHowever,when there is idle capacity,the market price will overstate the real cost to the company of the transfer and may lead the purchasing division manager to make bad decisions.演讲完毕，谢谢观看！