Internal buying decisions, Strategic Management

Assignment Help:

Transfer pricing is applied internally within a group for management accounting purposes e.g. to measure the performance of divisions.   Increasing or decreasing an internal transfer price will have no effect on group profit, but it will affect the profitability of both the internal seller and buyer.  Most profit centres e.g. divisions, are normally autonomous and have their own financial results 'ring fenced' e.g. a separate accounting system maintained for each profit centre.

Accounting convention for financial reporting (IAS 27 consolidated and separate financial statements) dictates that if there has been trading between group companies, then sales and purchases have to be removed 100% from the turnover and cost of sales, when reporting group  consolidated financial results.   For this reason, whatever transfer price is set, the price an internal seller receives, is equal to the cost the internal buyer pays, therefore the effect on group financial results when changing   or varying transfer prices would always be nil.

1345_Internal buying decisions.png


Related Discussions:- Internal buying decisions

Prepare a short notes on normal distribution, Problem 1: a. Prepare a s...

Problem 1: a. Prepare a short notes on Normal distribution. b. The probability that an employee getting occupational disease is 20%. In a firm having five employees, what is th

Student.., ambassador is aknown brand in ethiopa. the company produces diff...

ambassador is aknown brand in ethiopa. the company produces different kinds of product that assisting the company to generate maximum profit more that of competitors. today the com

Managing value based management, Q. Managing value based management? ...

Q. Managing value based management? Strategic selection of projects that create high shareholder wealth. Resource allocation and funding should have a recognised oppor

Formal planning, is formal planning hinder for success

is formal planning hinder for success

Assignment, i have many question i need to apply it on Saudi company and i...

i have many question i need to apply it on Saudi company and i need your help

Management strategic planning, You are an asset manager for a large public ...

You are an asset manager for a large public utility organisation. The organisation has a range of assets, ranging from major distributors to minor assets directly serving users (fo

Dominant strategy combination, Janet decides to play a game with her childr...

Janet decides to play a game with her children, Jay and Jill (who are fraternal twins) and Mo. Each child is in their own room and cannot communicate with each other. Suppose Jill

Knowledge audit, Commence the knowledge audit by identifying the knowledge ...

Commence the knowledge audit by identifying the knowledge gaps and blockages in the organisation, as follows: a)  Consider each of the ten checklist issues listed, and assess fr

What does process of crafting and executing strategy entail, What Does Proc...

What Does Process of Crafting & Executing Strategy Entail? 1.   Crafting & executing a company's strategy is a five-stage managerial process: (a). Developing a strategic vi

astro line, (A)    What is the optimal solution, i.e., how many units of e...

(A)    What is the optimal solution, i.e., how many units of every watch should be formed to maximize daily profits and how much daily profit will the company create? (B)    How m

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd