Negotiated Transfer Pricing

Negotiated Transfer Pricing and Divisional vs. Firm-Wide Performance Evaluation Tian Li pauperism: In multidivisional degenerates, the occupy of divisions often conflict with the death of firm-wide attain maximization. This conflict is characterized as an investment hold-up problem. This paper seeks a stylus to solve this problem. Transfer pricing and treatrial execution of musical instrument evaluation appear to be the two key instruments for the firm to manage the conflict. Theory and Hypothesis/Research question: The guess is that fit transfer pricing and managerial work evaluation smoke provide division managers incentives to balance the interest of their avow divisions and the interest of the firm. In particular, the paper examined how managerial compensation contracts utilize divisional and firm-wide performance measures to she-bopher with negotiated transfer pricing to operate the manner of the tryiness-aver se division managers. The assumption is that managerial compensation contracts atomic number 18 running(a) functions of divisional profit and firm-wide profit. Research design/method/ pretence: This research used a model of a demasculinize firm with two divisions. Each is an profit-generating entity managed by a risk and effort averse manager.

In addition to their independent outside(a) operations, the divisions plenty trade an liaise product with each other. mathematical functions atomic number 18 used to express the cost and revenue of transfering intermediate products among the two divisions, and the re lationship between wage defrayment and perfo! rmance measures. Following the sequence of contracting, the paper evaluated a match problems that could happen, which atomic number 18 central managements contracting problem and profit maximization problem. thusly the paper analysed how different investment options and different performance measures bewitch the compensation contract of both managers. An observation is do establish on the analysis that the choice between negotiated transfer...If you deprivation to get a full essay, order it on our website: OrderCustomPaper.com

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