Activity-Based Costing as a Basis for Transfer Prices and Target Setting
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In: International Journal of Economics and Business Administration, Vol. 8, No. 3, 2020, p. 489-499.
Research output: Journal contributions › Journal articles › Research › peer-review
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RIS
TY - JOUR
T1 - Activity-Based Costing as a Basis for Transfer Prices and Target Setting
AU - Lueg, Rainer
PY - 2020
Y1 - 2020
N2 - Purpose: The article deals with a division of a large electronics company. The disvison intends to improve its product profitability using Time-driven Activity-based Costing. It also aims at aligning the 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 article serve the purpose of raising students' awareness of the limits of cash-based incentive systems.
AB - Purpose: The article deals with a division of a large electronics company. The disvison intends to improve its product profitability using Time-driven Activity-based Costing. It also aims at aligning the 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 article serve the purpose of raising students' awareness of the limits of cash-based incentive systems.
KW - Management studies
KW - Product profitability
KW - activity-based costing
KW - transfer prices
KW - target setting
KW - incentives
KW - restructuring
KW - shareholder value
KW - customer satisfaction
UR - https://www.mendeley.com/catalogue/a06b54b4-958b-32ac-a64b-278eea73a59a/
U2 - 10.35808/ijeba/539
DO - 10.35808/ijeba/539
M3 - Journal articles
VL - 8
SP - 489
EP - 499
JO - International Journal of Economics and Business Administration
JF - International Journal of Economics and Business Administration
SN - 2241-4754
IS - 3
ER -