Transfer prices and compensation: an Activity-based Costing approach in the telecommunications industry
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In: European Journal of Management, Vol. 19, No. 2, 06.2019, p. 27-34.
Research output: Journal contributions › Journal articles › Research › peer-review
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TY - JOUR
T1 - Transfer prices and compensation: an Activity-based Costing approach in the telecommunications industry
AU - Lueg, Rainer
PY - 2019/6
Y1 - 2019/6
N2 - This case study deals with a division of a large telecommunications company that intends to improve its product profitability using Time-driven Activity-based Costing, and align the incentives of executives by setting feasible transfer prices and motivating targets. It can serve both as a discussion basis in class as well as an exam for students in management, operations, and accounting. The case illustrates how Time-driven Activity-based Costing may help managers to better understand differences in product profitability. The open questions at the end of the case study allow for an adjustment to the level of knowledge of the students. They also serve the purpose of raising students’ awareness of the limits of linear bonus contracts. 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.
AB - This case study deals with a division of a large telecommunications company that intends to improve its product profitability using Time-driven Activity-based Costing, and align the incentives of executives by setting feasible transfer prices and motivating targets. It can serve both as a discussion basis in class as well as an exam for students in management, operations, and accounting. The case illustrates how Time-driven Activity-based Costing may help managers to better understand differences in product profitability. The open questions at the end of the case study allow for an adjustment to the level of knowledge of the students. They also serve the purpose of raising students’ awareness of the limits of linear bonus contracts. 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.
KW - Management studies
KW - Product profitability
KW - Activity-based Costing
KW - transfer prices
KW - target setting
KW - incentives
KW - restructuring
KW - case study
KW - teaching notes
KW - shareholder value
KW - customer satisfaction
U2 - 10.18374/EJM-19-2.2
DO - 10.18374/EJM-19-2.2
M3 - Journal articles
VL - 19
SP - 27
EP - 34
JO - European Journal of Management
JF - European Journal of Management
SN - 1555-4015
IS - 2
ER -