 Activity-Based Costing as a Basis for Transfer Prices and Target SettingInternational Journal of Economics & Business Administration (IJEBA), 2020, vol. VIII, issue 3, 489-499 Abstract: Purpose: The article deals with a division of a large electronics company. The disvison intends to improve its product profitability using Time-driven Activity-based Costing. It also aims at aligning the incentives of executives by setting feasible transfer prices and motivating targets. Design/Methodology/Approach: The article illustrates how variance analysis and Activity-based Costing help managers to understand the different profitability of products better. Findings: The case study can serve both as a discussion basis in class as well as an exam for students in management, operations, and accounting. Practical Implications: 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. Originality/Value: The open questions at the end of the article serve the purpose of raising students’ awareness of the limits of cash-based incentive systems. Keywords: Product profitability; Activity-based costing; transfer prices; target setting; incentives; restructuring; shareholder value; customer satisfaction. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ers:ijebaa:v:viii:y:2020:i:3:p:489-499 Access Statistics for this article More articles in International Journal of Economics & Business Administration (IJEBA) from International Journal of Economics & Business Administration (IJEBA) |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.