activity based costing and transfer pricing

• Main Authors: Yu Ren Chang, 張裕任
• Other Authors: Yi Mian Lin
• Format: Others
• Language: zh-TW
• Published: 1999
• Online Access: http://ndltd.ncl.edu.tw/handle/77697882122307809193

碩士 === 國立彰化師範大學 === 商業教育學系 === 87 === Abstract The purpose of this research is to investigate the decentralization enterprise, which exists the information asymmetry and preference divergence between a top management and a subunit manager. How does principal make an optimal transfer price, inducing division management to work in the best interest of enterprise? This study will discuss marketing division, which faces an oligopolistic product market or perfect competition market. Transfer price under the enterprise''s best interest was obtained through linking management salary revenue function to division performance. The production division and the marketing division are both utilities maximizes based on transfer price set by top management . We adopt activity-based costing to avoid distorting cost allocation. It also compares the performance evaluation using full costing with variable costing in effect of marketing and production decision. The results are as follows. 1、Oligopolistic markets :（1） The optimal price decision of marketing division is a increasing function of the marginal cost of marketing, competitor price ,market power and the transfer price, but it is a decreasing function of marketing manager''s efforts. （2） In the condition of full cost based, the optimal transfer price of the principal is a function of the marginal cost of marketing division, competitor price, market power, direct cost of production division and allocation cost. （3） Without considering manager''s reserved utilities, the optimal efforts of production manager are a function of the marginal cost of marketing division, direct cost of production division ,competitor price ,market power and allocation cost in the full cost base.（4） In the condition of variable cost base, the optimal transfer price is a function of marginal cost of marketing division, competitor price, market power and direct cost of production division. Transfer price in variable cost base is lower that in full cost base, because overhead cost allocation is not considered in the variable cost base. （5） The optimal effort of production management is a function of the marginal cost of marketing division ,competitor price, market power and direct cost of production division in the variable cost base, Overhead cost allocation can not affect the effort of production manager, because the variable cost method don''t concern overhead cost. （6） Comparing optimal effort in the full cost based with variable cost based ,the variable cost base performance measurement stimulates effort more than the full cost based . 2、Perfect competition markets : （1）The optimal sales quantity of marketing division is a function of the contribution of marketing and the transfer price. The higher transfer price is the lower sales quantities are.（2） Under full costing, the optimal transfer price is a function of the contribution of marketing division, direct cost of production division and allocation cost, hence, distorting overhead cost allocation will make top management do wrong transfer pricing decision.（3） The optimal efforts of production manager are a function of the contribution of marketing division, direct cost of production division and allocation cost. The more cost is allocated, the fewer effort is input.（4） Under variable costing, the optimal transfer price is a function of the contribution of marketing division and direct cost of production division. Transfer price in variable costing is lower than one in full costing, because it does not consider overhead cost allocation.（5） The optimal effort of production manager is a function of the contribution of marketing division and direct cost of production division. Overhead cost allocation can not affect on the effort of production manager.（6） Comparing optimal effort in full costing with variable costing, the variable cost based performance evaluation stimulates effort more than the full cost based. 123