SECTION 22

MANAGEMENT CONTROL DEVICES, TRANSFER PRICING, AND MULTINATIONAL CONSIDERATIONS

LEARNING OBJECTIVES

1 . Describe a management control system as well as three essential properties

2 . Describe the huge benefits and costs of decentralization

3. Explain transfer rates and four requirements used to evaluate them

4. Calculate transfer prices employing three distinct methods

5. Illustrate just how market-based transfer prices enhance goal convenance in correctly competitive market segments

6. Prevent making poor decisions when transfer rates are based on full cost plus a markup

six. Understand the range over which two divisions discuss the copy price when there is empty capacity

8. Construct an over-all guideline intended for determining the very least transfer price

9. Integrate income tax factors in international transfer costs

CHAPTER OVERVIEW

Chapter twenty-two examines supervision control systems of organizations with focus on the function of a subsystem, that of the accounting info system. In Chapter six the concept of managing control systems was launched through the cash strategy process. Three key properties of a administration control program are described in this chapter but examined in 3 different chapters: (1) position with strategy—Chapter 13, (2) fitness with organizational structure—Chapter 22, and (3) functionality of managers and employees—Chapter 23.

The objective of a supervision control method is improving the collective decisions within an organization in an monetarily feasible method. Throughout the text the importance of providing relevant and dependable information to decision makers via the accounting information program has been stressed. Again that purpose can be illustrated applying transfer costs in a decentralized organization as a means that accountancy firm provide info to improve managers' decisions.

This kind of chapter advances from a notation of a key real estate of the administration control system—" designed to in shape the company's composition and the decision-making responsibility of individual managers”—to a closer look at organizational structure—centralized or decentralized—to a detailed study of the part of copy prices for any decentralized business. Included will be multinational factors and the effects of governmental levies, specifically income taxes.

SECTION OUTLINE

We. Management control systems

A. Overview of management control systems

1 . Characteristics of an powerful system

a. Achieves its stated aim of helping and improving decisions pertaining to benefit of business

b. Can be cost effective

c. Performs because designed

m. Influences behavior of people who utilize it

2 . Part accounting data plays in system

B. Specifics of supervision control devices

Learning Aim 1:

Describe a management control system as well as three crucial properties

1 . Management control system: method of gathering and using data to aid and coordinate the planning and control decisions throughout an organization also to guide the patterns of their managers and employees

a. Information gathering

i. The two financial data and nonfinancial data

ii. From within the organization and outside the corporation

iii. Different kinds of information required for different jobs

b. Statement: some firms use sole report of balanced scorecard [Chapter 13]

c. Behavior of managers and employees

my spouse and i. Formal administration control system

•Includes precise rules, types of procedures, performance actions, and bonus plans

•Consists of several systems, which include management accounting system and human resource program

ii. Simple management control system

•Includes shared principles, loyalties, and mutual responsibilities among people of corporation

•Includes company culture and unwritten best practice rules about acceptable behavior

installment payments on your Key houses for considering an effective management control program

a. Tightly aligned to the organization's approaches and desired goals

b. Fit the company...