Activity-Based Costing as a Basis for Transfer Prices and Target Setting

Publikation: Beiträge in ZeitschriftenZeitschriftenaufsätzeForschungbegutachtet


Purpose:The articledeals with a division of a large electronics company. The disvisonintends to improve its product profitability using Time-driven Activity-based Costing. It also aims at aligningthe incentives of executives by setting feasible transfer prices and motivating targets. Design/Methodology/Approach: The article illustrates how variance analysis and Activity-based Costing help managers to understand the different profitability of products better.Findings:The case study can serve both as a discussion basis in class as well as an exam for students in management, operations, and accounting. Practical Implications: Students will need to reflect on how a mechanical application of incentive systems can lead to dysfunctional decisions that run counter to a company’s business model.Originality/Value:The open questions at the end of the articleserve the purpose of raising students’ awareness of the limits of cash-based incentive system
ZeitschriftInternational Journal of Economics and Business Administration
Seiten (von - bis)489-499
Anzahl der Seiten11
PublikationsstatusErschienen - 2020