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Responsibility Accounting and Transfer Pricing

Research Paper on Managerial Accounting

Responsibility Accounting and Transfer Pricing

Introduction

The report describes the important of responsibility accounting and transfers pricing in contemporary liquidity firms. There are two kinds of firms normally needed the financial worth toResponsibility Accounting and Transfer Pricing Research Paper compete the market. The first kind of firm is centralized firm and the second kind of firm is decentralized firm. The centralized firm relies on the accounting actions in a diversified manner, and the decentralized organization needs the responsibility accounting and transfer pricing. For the successful intervention of responsibility accounting the responsibility centers concept introduced. The concept also considered the transfer pricing. The functional approach of the management accounting system needs dollar figure for the price distribution from one division transfer to another division transfer (Jost, Pfaffermayr, & Winner, 2014).

Transfer Pricing Overview

According to Mojgan, (2012), at the first point, it should be clear that decentralized firms in responsibility centers need a transfer pricing. It is all about the cost, profit, revenue and the investment centers as the tools for account monitoring. The performance of the responsibility centers is a basic approach for the identification of the tools. The standard cost and the divisional profit mentioned under the approach of transfer pricing. Further, the return on investment also has the direct linkage for the situation analysis. It is needed for the trends and the product transferred between the two divisions has direct implication (Mojgan, 2012).

The dollar figure of transaction allows the functional approach for the responsibility centers to have the idea about the transfer price and ways towards the price change extracted from Nkem & State, (2013). The maximization of the profit or decentralized organization measures through the variable for the transfer pricing. Any sub-unit under the decentralized organization has the direct linkage for the revenue and expenses. The optimal decision making is possible through the conceptual approach for the profitability of organization to have the idea for each division of a company. The most of the cases of the transfer pricing need the maximization of the profit for the desired figures on economies of scale (Nkem & State, 2013).

Responsibility Accounting and Transfer Pricing Research Paper

Source: (Nkem & State, 2013)

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