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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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