Transfer prices and compensation: an Activity-based Costing approach in the telecommunications industry

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Transfer prices and compensation: an Activity-based Costing approach in the telecommunications industry. / Lueg, Rainer.
In: European Journal of Management, Vol. 19, No. 2, 06.2019, p. 27-34.

Research output: Journal contributionsJournal articlesResearchpeer-review

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@article{899d6ec3c0d04dbdab5601c6923098ed,
title = "Transfer prices and compensation: an Activity-based Costing approach in the telecommunications industry",
abstract = "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{\textquoteright} 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{\textquoteright}s business model.",
keywords = "Management studies, Product profitability, Activity-based Costing, transfer prices, target setting, incentives, restructuring, case study, teaching notes, shareholder value, customer satisfaction",
author = "Rainer Lueg",
year = "2019",
month = jun,
doi = "10.18374/EJM-19-2.2",
language = "English",
volume = "19",
pages = "27--34",
journal = "European Journal of Management",
issn = "1555-4015",
publisher = "International Academy of Business and Economics",
number = "2",

}

RIS

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 -

DOI