高级管理会计Advanced Management Accounting课件6 Transfer pricing.pptVIP

Negotiated Transfer Prices In some decentralized organizations, managers are allowed to negotiate their own transfer prices and are given the autonomy (degree of freedom to make choices) to buy from, or sell to, a subunit. Some managers feel this is a good training ground in negotiation. The ability of each manager to negotiate, in addition to the relative bargaining strengths of the buying and selling division, are used to determine a transfer price between the minimum variable cost for the selling division and the market price for the buying division. Negotiating transfer prices can sometimes lead to conflicts between managers Horizon Petroleum Transportation division (profit center) Refining Division (profit center) pipeline External market Crude oil (matamoros,mexico) (houston texas) External market gasoline Gasoline selling price $190 Contract price $72 Varialbe cost $1 Fixed cost $ 3 Varialbe cost $8 Fixed cost $ 6 Selling subunit Buying subunit $82.5 Market price $85 in houston (72+1)7382.585 Total Operating income=revenues-cost of crude oil purchases in matamoros-transpotation division costs-refining division costs=1200 Item $85 $79.8 $82.5 Transpotation division 900 380 650 Refining division 300 820 550 Total 1200 1200 1200 The principal effect of transfer pricing is to reallocate total company profits among business units, but there are a number of ways in which transfer pricing can increase or decrease the total profits: ? The choice of transfer prices and the allocation of decision rights within an organization can lead to managers making decisions which, although best for their responsibility centre, are not optimal for the company as a whole. ? The choice of transfer prices can affect the income taxes paid (where the units are not in the same tax jurisdiction), thus increasing or decreasing after-tax income available to shareholders and other stakeholders. To the extent that the transfer pricing practices affect