Page 131 - APM Integrated Workbook STUDENT S18-J19

Divisional performance appraisal and transfer pricing

Problems associated with divisional

structures

 Co-ordination of divisions to achieve overall corporate objectives.

 Dysfunctional behaviour and sub-optimal divisional decision.

 Controllability – the division’s managers should only be held accountable for
factors they can control (responsibility accounting).

 Inter-dependence of divisions making performance measurement difficult.

 How to re-apportion head office costs.

 How to set transfer prices.

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