Since transfer prices are usually equal to, or lower than, market prices, the entity selling the product is liable to get less revenue. Market prices are based on supply-demand relationships, whereas transfer prices may be subject to other organizational forces. Additionally, intra-entity animosity might arise, especially if the transfer …
If present value of cash inflow is equal to present value of cash outflow, the net present value is said to be zero and the investment proposal is considered to be acceptable. Provide a single, clear number that managers can compare with the initial investment to work out the success of a project or investment. An NPV calculated using …
But rather than examine each project individually, some organizations emphasize always delivering under budget, sometimes to the detriment of the final output. Still others are too cavalier with the budget, and don’t feel bound by a predetermined set of numbers. Even though budget is only one aspect that determines the success of a …
Occasional accounting reconciliations mean that account balances in the company system can be matched up with balances in independent accounts such as credit customers, suppliers, and banks. •Require computer users to have tight control over storage of programs and data.
These systems must ensure that the reports are timely so that …
If a company uses standard full-cost transfers, it can substantially reduce the variation in price the buying unit receives. This approach makes it possible to measure more precisely each unit’s contribution, especially when variances are charged to the unit responsible for them. It also makes it possible to more clearly separate the …
Direct labor costs include the labor costs of all employees actually working on materials to convert them into finished goods. As with direct material costs, direct labor costs of a product include only those labor costs clearly traceable to, or readily identifiable with, the finished product.
Inspection of incoming raw materials and …