Abstract Reviews the book "The Management of Corporate Financial Assets: Applications of Mathematical Programming Models," by J.S.H. Kornbluth and G.R. Salkin.
Abstract Presents a reply to comments made by Akshay K. Talwar on a transfer pricing system based on opportunity costs. Relevance of transfer pricing in the budgeted profit approach; Inconsistency in Talwar's approach to evaluating divisional managers.
Abstract This article presents information on an empirical study using factor analysis to analyze the relationship between budgetary slack and managerial behavioral variables. The magnitude of slack over time depends on the profitability of the firm, its sales growth, and many other behavioral factors that will be explored later. It is assumed that the costs of a firm that is successful in the market place will, tend to rise because of the existence of budgetary slack. The existence of budgetary slack causes corporate profits to be less than optimum, since the estimated cost function is not minimum, in classical economic theory. Budgetary slack also functions as a mechanism to stabilize the organization's system response to wide variability in its environment. It is assumed that top management is not in a good position to determine and control the amount of slack due to the different technologies and peculiarities of each division and the submission of divisional budgets in total aggregates. The size of the organization and the centralization or decentralization of decision-making are two factors that may affect the validity of this assumption.
Abstract The article presents information on the economic foundation of transfer pricing system. When there is a market price for intermediate goods, they are transferred according to such a price, assuming that the goods transferred are produced in a competitive market where the supplying center cannot influence the sales price in the open market by its own output decision. Pricing intermediate goods according to market price has the advantage of motivating the supplying center to reduce its cost as much as possible and emphasize innovation and research and development, since it will be to its advantage. Inventory level and asks for an explanation if it exceeds a certain level. Another solution is that the buying division commits itself to acquire a certain volume. These methods are partial solutions to the problem. Approximating marginal costs, to price transfer goods has several limitations since this approach ignores several strategic factors. Arriving at an optimal solution based on opportunity costs from the company's point of view, accepted by profit centers, is feasible.
Abstract This article presents a quantitative model for accounting control which is an important function of accounting. It is defined as that process which discovers and reports information enabling managers to correct or prevent unfavorable conditions. This article also examines the basic control aspects of three control models, (1) the traditional accounting model employing standard costing, (2) an accounting model based on classical statistical theory, and (3) an accounting control model based on modern decision theory. Two criteria are currently used to decide whether to investigate deviations from standard. They are, the absolute size of a deviation or the relative size of a deviation, unfavorable or favorable. The magnitude of these criteria depend upon management judgment and experience. The accounting control model based on classical statistics assumes that standard cost is equal to the mean of a normal probability distribution, standards are developed as ranges, not as point-estimates.