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18 Cards in this Set
- Front
- Back
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transfer pricing
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the price on subunit in a company charges for the services it provides to another subunit
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four perspectives of the balanced scorecard
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financial perspective, customer perspective, internal business perspective, learning and growth perspective
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goal congruence
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when individuals and groups work toward achieving the organizations goals
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the freedom for managers at lower levels of the organization to make decisions
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decentralization
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the degree of freedom to make decisions
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autonomy
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benefits of decentralization
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creates greater responsiveness to local needs, leads to gains from faster decsion making, increases motivation of subunit managers, assists management development and learning, sharpens the focus of subunit managers
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costs of decentralization
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leads to suboptimal decision making, focuses managers attention on subunit rather than company as a whole, increases costs of gathering information, results in duplication of activities
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the benefits of decentralization are greater when
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companies face uncertainties in their envirionments, require detailed local knowldedge for performing various jobes, and have few interdependanceis among divisions, frequently product mix and product advertising
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four types of responsibility centers
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cost center, revenue center, profit center, investment center
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cost center
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manager is accountable for costs only
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revenue center
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the manager is responsible for revenues only
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profit center
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the manger is accountable for revenues and costs
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investment center
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the manager is responsible for investments, revenues, and costs
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the product or service transferred between subuints of an organization is called
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intermediate product
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three methods for determining transfer prices
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market based, cost based, negotiated
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market price transfers leads to optimal decsions when
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the market for the intermediate product is perfectly competitive, interdependencies of subunmits are minimal, there are no additional costs or benefits to the company as a whole from buying or selling in the external market instead of transacting internally
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a perfectly competitve market exists when
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there is a homogeneous product with buying prices eqal to selling prices and no individual buyers or sellers can affect the prices by their own actions
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by using market based transfer prices in perfectly competitive markets a company can achieve
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goal congurence, mangement effort, subunit performance evaluation, subunit autonomy
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