When Organizations Choose to Decentralize Their Operations, Divisions May End

question 163

Essay

When organizations choose to decentralize their operations, divisions may end up exchanging goods and services with one another rather than with external suppliers or customer.Since managers are evaluated based on how well their divisions perform, they want any transaction with another division to generate positive results.
Required:
Discuss the four ways of determining a transfer price and explain the advantages and disadvantages of each.

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Definitions:

Feedback

Information given to someone about their performance or behavior with the intent to guide future improvement.

Classroom Volunteers

Individuals who offer their time and skills to assist teachers and support students' learning in a classroom setting.

Positive Experience

Any event, situation, or interaction that results in a beneficial impact on an individual's feelings, perceptions, or life situation.

Compensation

The act of providing something, typically money, in recognition of loss, suffering, or injury incurred; or in a business context, the total of all rewards provided to employees in return for their services.