MGT323H5 Study Guide - Final Guide: Balanced Scorecard, Factors Of Production, Earnings Before Interest And Taxes
Document Summary
Pros: access local info, motivate, competition, central mgm. Cons: global congruence (division goals dominate corporate), need responsibility accounting. Responsibility accounting: system to measure performance of each responsibility centre. Transfer price: internal pricing system to facilitate performance evaluation of different divisions in decentralized organization. Becomes rev for selling unit, and purchase cost for buying unit affect"s each unit"s oi (only to facilitate internal performance evaluation) Minimum transfer price = leaves selling division indifferent to transfer while maximum is vice versa w/ buying. Types: market based(reflect opp cost), negotiated (use when mkt price not avail, info asymmetry), cost based vc / fc (do not reflect opp cost, may be outcome of negotiation) Should reflect opp cost of both buying and selling division. Can also be used for tax planning / other strategic objectives. Pre/post sales internal & external failure. Defects per million opportunities (dpmo):[ # incorrect / (total produced)] x (total ratio) = # incorrect ratio.
