MGAB03H3 Lecture Notes - Lecture 13: Transfer Pricing, Retained Earnings, Variable Cost
Document Summary
Status check answers: c, b, a, b, c, a, c, d, d, c. Need an information (financial and non financial) and management system that allows company to plan and control activities and measure performance of each division. Mcs must be cost efficient and influential to people who uses the information. Managers decide on the degree of decentralization to set up for different purposes. For example, top management might consider that centralization of international transfer pricing decisions would allow the company to lower overall taxes with a centrally coordinated strategy while leaving other areas, such as budget preparation, decentralized. In multinational companies, a certain degree of decentralization is necessary because local languages, customs, business practices, and government regulations are best known and navigated by the managers in each country. Centralization of transfer pricing decisions requires changes in the company"s performance measurement system. Organization structure must fit with management control system. Decentralization raises additional set of management control issues.
