Recent orders
In 1975 NK cells also known as “natural killer cells” were discovered by a man named Rolf Keossling
Victoria Brown
Biol 454L Thursdays 11:30-2:30pm
In 1975 NK cells also known as “natural killer cells” were discovered by a man named Rolf Keossling and his team in Sweden. There are two different types of lymphocytes known as the B cells and T cells but, so are NK cells. Lymphocytes are white blood cells that is one of the body main immune cells. NK cells are the most aggressive and lymphocytes that have no immunological memory. They estimate about 5-10% of the circulating lymphocytes population. When It comes to tumors, cancer and unrecognized virial infected cells NK cells play a major role in rejecting and killing them in the system. Although NK cells ae in the same family and progenitor as B and T cells; NK cells have a different ability to attack and kill tumor cells.
Natural killer cells have the ability to attach and kill tumor cells without activating to an antigen and presenting cells, and that’s how the name “natural killer” is another name for NK cells. Nk cells are a innate effector lymphocytes that are divided into cytonkines that produce CD56 “bright” and CD56 “dim”. They also protect against many various infection’s microbes’ diseases. NK cells are found in multiple areas such as in the bone marrow, uterus, spleen, lungs, lymphoid tissues, thymus etc. When NK cells are working, they look for early cancer cells, diseases and cells that are not noticed in the body before. NK cells are activated by either macrophage cytokines or interferons and can respond indirectly or directly. If its directly they respond by recognized bad virus cells and indirectly means they are working with the dendritic cells that express toll like receptors that responds to microbes from secrete cytokines.
When a virus enters the system, it will multiply and copy on to health cells. NK cells work by getting in contact with the target and aims its lethal Tucson’s that will produce a hole in the cell they are targeting in the cell membrane and will destroy the cancer cell membrane and cell. It will be deleted to its death and this process is called that is called apoptosis manners. Apoptosis manners simply kills in a selective manner that is designed to kill cells. After the NK cells have attached and killed the cell, they are able to unattached and attach on to different abnormal cells in the system. When NK cells have moved on to look for more abnormal cells the old cells that have been attacked and deleted sometimes takes up to 24 hours to establish and separate themselves from different organs and disappear for good.
Stepping into a public place where thousands of people of have been you can be exposing yourself to bad bacteria and viruses you can’t see. NK cells are used in are everyday life because, each time you go into a area where multiple people have been you are at risk of touching or breathing another person germs. When a cold enters a body, it is the NK cells job to go and kill before hurting and affecting other healthy blood cells in the body. Many normal healthy cells will express MHC 1 receptors; which are antigen that alerts the immune system to viral infected cells. They can be expressed on the surface of the cell are present by peptide fragments from proteins. When NK cells recognize an MHC 1 it will prevent it from killing the cell.
In 2019 there was a virus called and discovered called Coronavirus 2019 that turned into a dangerous a global pandemic.
12 Senator That Changed Texas
12 Senators That Changed TexasThe voters of Texas elect members into the State Legislature to represent the people’s will in Texas decision making. These members have an obligation to their constituencies to speak and vote on the bill’s brought before them. The income they receive for their duty to the state comes directly from the taxpayer’s within the state. In The Miracle of the Killer Bees: 12 Senators Who Changed Texas Politics by Robert Heard, the negligence of 12 Texas Senators toward their political and constitutional responsibilities is unrightfully exonerated. Heard’s descriptions of the Senators, legislative actions, and political importance are extremely bias, and he does not portray the incident fairly.
The legislative bill, which instigates the controversy and events taking place in this book, calls for two separate days for primary elections. The presidential primary would be held on a different day than other political offices. The Senate, however, is to discuss another bill concerning the election, bill 1149, but it is foreseen that the house will send back the bill amended, providing for a separate-day primary. The reason for converging thoughts on bill 602, the one concerning a separate-day primary, was its effect on the democratic elections coming up. The anticipation of a close race between Ronald Reagan and John Connelly in upcoming Republican Party’s primary election created a strong desire for conservative Democratic voter’s to participate. However, with the more conservative democrats voting on the Republican primary, the more moderate and liberal Democrats would dominate in nominating their candidates for other political offices.
This took place in 1979, a time when Democrats were the Texas majority; only four of the thirty-one members of the Senate being Republican. The 602 bill would require a two-thirds majority in the Senate, which would keep it from being considered due to lack of support, but if 1149, which is more favorable, gets to the house and then sent back with provisions for 602 only a majority in Senate would pass it. Lieutenant Governor, presiding officer in the Senate, Bill Hobby posted notice that the Senate would be switch to a less traditional rule. This gave Hobby ability to switch to “regular order of business” on Friday, which allowed for the pending election bill, 1149, to be decided on. That prior Tuesday, a filibuster by some of the killer bees kept the bill from being resolved; therefore, this overcame their hope to kill it. The name, killer bees, was actually first given to Senator Lloyd Doggett and Senator Ron Clower by Hobby for their use of filibusters in anti-environment and anti-consumer legislation. These two and Senators Parker, Mauzy, Schwartz, Jones, Patman, Truan, Kothman, and Vale made up the ten that together met at Parker’s legislative aide, Dora McDonald’s for breakfast on that Friday and refused to go to the capital building and perform their Senatorial duties. Also missing were Longoria, who had a previously scheduled court date, and Brooks, who did not clearly take sides with either the bees or Hobby.
The Senate, therefore, did not have two-thirds or 21 of its members, which is necessary for them to hold session. The killer bees accomplished their mission, to break the quorum, and defeat Hobby’s attempt to pass the new bill. The rest of the book describes their hiding in the McDonald’s one room apartment and the call placed on the Senate issuing a statewide search involving the DPS for the missing Senators including Longoria, whom sided with the bees and Brooks, who was in Oklahoma and kept his intentions covert to everyone. Two Senators need to be found in order to conduct business in the Senate giving them the two-thirds attendance. Heard gives many accounts of Hobby and the remaining Senator’s anger and disgust of the current situation.
Finally after 4 days with no sign of the Bees, Brooks back from Oklahoma claims he had no affiliation with the Killer Bees and their cause, but had just found out about the happenings in the Texas Senate. He sets up to meet with Hobby that night to talk about negotiations for the return of the Killer Bees. He acts as spokesman for the Bees, though never discusses this with any of them or even makes them aware of his conference. Brooks never actually associating himself with the Killer Bees and seems to have waited for either another senator to be caught or a popular opinion from the public to be visible, following the general rule in politics. The next day Hobby was ready to negotiate, after also receiving a call from Gene Jones, whom remained hidden but split with the other nine in McDonald’s apartment the first day, because the compact living conditions were intolerable. Schwartz called Hobby they discussed the conditions of the Killer Bees return: none of the Killer Bees could make personal privilege speeches against Hobby or any of the other senators, the call on the Senate would be lifted, and the Senate would handle routine business at a time after 3 p.m. letting the Bees have a press conference to share their feelings with the press, and the 1149 bill would then be laid out for a second reading, but no further moves could be made without the traditional two-thirds vote to suspend the rules. This was agreed upon and the Bees came back to the Senate.
The 1149 bill did not receive sufficient votes for the two-thirds majority and was killed in the Senate. This gives the impression that the popularity of the Killer Bees might have had some influence on whether the senators should oppose the bill, again wanting to please the Texas voter. Their popularity was strengthened through the press’ support of the Killer Bees. Heard writes,
The Dallas Times Herald came down much stronger, saying the Bees “deserve to be remembered as heroes” for the fight against the “rigged presidential primary.”(81) Another possible explanation for their popularity would be the Killer Bees’ actions show a certain rebellious and unconventional behavior that grabs the attention of the people, deviating from the predictable, seemingly boring routine of a congressional office to those that follow politics closely. The Killer Bees also mislead the public about their motives and against Hobby; such as Schwartz’ press statement:
We understand that some of the members of the Senate have been prompted to speech-making about all the wonderful bills not being considered while the rest of us are protecting Texas from an unwanted, rigid bill. There has never been any question of our willingness to work under the same rules we started with this session. Bills require a two-thirds vote in the Senate to be considered but now the pressure is on and the rules have been changed in midstream for one
The Senator claims the Lieutenant Governor changed the rules in midstream; however, the switch is justified constitutionally. If the constitution calls for terms unfavorable to Texans, What better position to work for a change than State Senator? He later goes on to say the senators favoring the bill are trying to save their own political career at the expense of the voter, yet, the rejection of this bill will strengthen the vote of moderate and liberal Democrats. It would seem that living in a 19 by 14 foot room with 8 other men for five days in order to avoid an unwanted bill as a fairly liberal action. The Five Million dollars appears incredibly large when alone, however, after divided by all the taxpayers in Texas comes to be greatly minute. In 1980 the Texas population stood at 14,229,191 according Texas Census records.
Heard’s account of the “miracle” of the Killer Bees shows obvious favoritism of not only the Democratic party but the moderate to liberal side of it. Heard exonerates the actions of these 12 senators. The actions of these Texas Senators much resemble a small child when he sees something he wants, but knows can not have. First, the child will try take it with out confronting anyone about it; similarly, the Bees try to filibuster not letting anyone even have a say in the matter. When that does not work then the child will be completely stubborn and obstinate, not cooperating, crying “that’s not fair” and making the parent look guilty in front of peers and those they respect. In the same way, these twelve want the bill in their favor. When they find out they can not have things how they want they refuse to cooperate with Lieutenant Governor Bill Hobby and the majority, obvious authority in the Senate. The Bees then cry not to Hobby himself, but to the media and the public, whom Hobby must respect and appear loyal to. As a parent might give in to a whining child in order to regain cooperation and tend to more important matters, Hobby, having more important priorities, must also give in to the senators to regain their cooperation in order to accomplish priorities. The difference between the child and the senators is that a child has not yet learned the skills of persuasion and the senators have made a career out of it.
Heard’s use of the media in the account depicts only one side of general opinion. Robert Heard himself is a news writer. Any event that calls for news coverage is already good to one who works for the media. Important happenings attract the public eye. In order to win viewers, listeners, or readers concerning stories of conflict, the media picks a victim and an assailant, and then imposes their side of the story on the public. As though fiction, the writer, or newscaster only portrays characteristics corresponding with the perceived connotation of good and bad or right and wrong. In this incident, the ones claiming to be taking the side of the people and working for justice in the Senate are easily targeted as victims of Bill Hobby’s selfish and unfair personal wants. When this preconceived notion is already in the heads of Texans, little room is left for convincing otherwise. Heard’s report of the nine Senators living in the small apartment, which would probably make for an entertaining reality show, is interesting; however, his one-sided sources and descriptive characterizations make for good reading but little room for personal interpretation. In a nonfiction book on political persons and events, the information should not be blinded by an author’s personal viewpoint. The facts should speak for themselves.
Bibliography:
Financial Accounting (Eva, ROI,Transfer Price)
Financial Accounting
Table of Contents
TOC o “1-3” h z u Part A PAGEREF _Toc364865401 h 2Performance Measure PAGEREF _Toc364865402 h 2Introduction PAGEREF _Toc364865403 h 2Organisational Role in Performance measure PAGEREF _Toc364865404 h 2Short Term Financial Performance Measure for Management PAGEREF _Toc364865405 h 3Types of Responsibility Centre PAGEREF _Toc364865406 h 3Measuring Performance through Profitability PAGEREF _Toc364865407 h 3Return on Investment (ROI) PAGEREF _Toc364865408 h 3Economic Value Added PAGEREF _Toc364865409 h 5ROI (Return on Investment) and EVA (Economic Value Added) as Performance Measure PAGEREF _Toc364865410 h 6Part B PAGEREF _Toc364865411 h 7Transfer Pricing PAGEREF _Toc364865412 h 7Objective of Transfer Pricing PAGEREF _Toc364865413 h 7Transfer prices in Accounting Term PAGEREF _Toc364865414 h 8Mechanic of transfer pricing PAGEREF _Toc364865415 h 8Alternative method of Transfer Prices PAGEREF _Toc364865416 h 8Market Based Transfer Prices PAGEREF _Toc364865417 h 9Full Cost Transfer Prices PAGEREF _Toc364865418 h 10Cost-Plus a Mark-up Transfer Prices PAGEREF _Toc364865419 h 11Negotiated Transfer Prices PAGEREF _Toc364865420 h 12Conclusion PAGEREF _Toc364865421 h 13References PAGEREF _Toc364865422 h 14
Part APerformance MeasureIntroductionPerformance measures are barometer that scrutinizes the effectiveness in performing an activity and our capability in suing the available resources. Traditionally, managers focused on short run financial performance measure and generally neglect the long run performance measure and critical non financial activities, the main reason that manager focuses on the short run financial measure is that they are generally judged on a short term basis. Non financial performance and long run data are very difficult to collect and many times the data are unavailable. Recent scandal related to accounting created an immense pressure to the manager to achieve short term performance target (Bacidore, 1997). Many managers are now focusing on the longer horizon to analyse the performance. An organisation performance measure and evaluation play a significant role to synchronize management, worker and owner goal.
Organisational Role in Performance measure
1) Manager is generally responsible to make design and implement strategies that lead to the proper utilization of the organizational resources which help to achieve the organisational goal. The manager talent and time are utilised in planning, controlling, monitoring and decision making process (Chen and Dodd, 1997).
2) Internal performance measure product service generally competes in the following areas such as product feature, quality and price. Good performance in any of these areas helps to gain a competitive advantage. The performance of each employee also plays an important role in the success of the organisation. Performance measure helps to make a judgement about the performance of individual which help in the promotion and retention procedure.
3) External performance measure help to give the actual picture of the organisation ability in satisfying customer better than their competitors. One of the most common performance measure used by the organisation is profit, which can be calculated by the net income or operating income.
Short Term Financial Performance Measure for ManagementA traditionally focus of performance measurement at the managerial level is on financial part and focuses on monetary measure such as return on investment, residual income and economic value added. Responsibility accounting involves differentiating the financial information into different areas of organisational activity that from the controllable sets and then assigning them the task according to their skill to individual manager (Lehn and Makhija, 1996). These parts of organization activity are known as responsibility centre or Strategic business unit.
Types of Responsibility CentreCost Centre (CC): Manager only focuses on the costs.
Revenue Centre (RC): Manager only focuses on the sales.
Profit Centre (PC): Manager focuses on both revenue and costs.
Investment Centre (IC): Manager focuses on revenues, costs and investments.
Measuring Performance through ProfitabilityAn organisation ideally should be focussing on the relative measure rather than absolute measure. From a research it has been proved that there are numerous measures are present to determine the performance of the organisation. Such measure includes Return on investment, Economic value added and free cash flow. The performance measure decided should ensure that the goal of the business is achieved. The main use of the performance measure is to increase the wealth of the shareholder and to manage the performance of the employees and each and every individual of the organisation (Bacidore, 1997).
Return on Investment (ROI)
Return on investment is a relative measure of the performance which can utilised for the comparison with the other type of investments. Although the ROI is considered to be the most simple method but sometime its uncertain. Profit can be described in many ways and allow the figure to be manipulated.
ROI = Gain from Investment- Cost of Investment/Cost of Investment * 100
For Example
Project A Project B
Profit( Revenue –Investment) £ 100m £200m
Investment £ 400m £2000m
ROI 25% 10%
Here the question arises which project investment will yield maximum profit. The answer we arrived with the help of ROI is project B earns higher profit but project A is much more profitable when compared with the ROI of project B. Every investor focuses on the return before investing in any project, ROI is one kind of cost benefit analysis which measure the cost of the project in comparison with financial term (Morgan, 1997).
Advantages of ROI:
ROI mainly focuses on the profit
Instant availability of the data
It’s a simple method to implement as the manager selects the project which have higher ROI’s
Easily understood in the various industries and other functional organisation.
A method that help the manager to identify and monitor the project dependencies and their impact on ROI (Nuelle, 1996).
Disadvantages of ROI:
Project are rejected which have slow payoff.
The ROI calculation does not take time values of money or the uncertainty/risk related with the current project or investment.
ROI calculation may sometime overvalue investment since the ROI favour short term saving and fail to notice long term cost such as support, maintenance and software upgrade.
As ROI can be calculated in various ways creates a problem of consistency.
When ROI is used as a managerial performance measure, it can guide to decision that are minimal for single divisional but sub optimal for the company. ROI focuses on short term profitability looking at last year or last quarter for performance evaluation (Ottoson and Weissenrieder, 1996).
Economic Value AddedOne of the most used measures that have been generated to directly synchronize the interest of shareholder with the manager of the organization. Theoretically alike to residual income, EVA is an amount of profit produced higher than the cost of the capital. However, EVA account on the target rate of return to the market value of the capital invested in the project instead of the book value of asset used in residual income (Reimann, 1988).
EVA = NOPAT – Capital Cost (WACC x Capital Employed)
Just earning a profit from a particular project is not enough for a organisation, it should earn a profit which should be exceeding the cost of capital.
Where,
WACC = Weighted Average Cost of Capital
NOPAT = Net Operating Profit before Interest and After Tax
Capital Employed – Net Block + Trading Investment + Net Current asset
Economic value added is after tax profit subtracted by cost of the capital. If EVA is positive, the company is making profit and in return the wealth of the shareholder increasing but when EVA is negative then the capital base of the company is reducing which will lead to the breakdown of the organisation (Stewart, 1991).
Advantages of EVA:
EVA is relatively easy to calculate and simple to implement.
It can be used as management tool to enhance the performance.
It gives the intrinsic value in the same ways as a DCF (Discounted Cash Flow).
It helps the analyst rigorous in making the future financial profile.
The adjustment made avoid the alteration of the outcome by the accounting policies in place and therefore yield to goal achieving decision (Stewart, 1993).
Disadvantages of EVA:
It does not provide comparison between projects as EVA is an absolute measure.
There are numerous theory made when calculating the WACC, numerous adjustment are made to make profit and capital employed figures.
EVA does not facilitate the forecast of future cash flows and does not predict the present values rather EVA depend upon the present level of earning.
EVA prove to be more beneficial to shareholder and hence little importance to the rest of the stakeholders.
One of the most disadvantages EVA it can easily abuse or manipulated by the unscrupulous user (Tang, 1993).
Limitation OF EVA and ROI
Income of the project can be abused on short term basis.
Invest on asset is difficult to measure properly.
ROI (Return on Investment) and EVA (Economic Value Added) as Performance MeasureThe ultimate objective of an organisation is the maximization of wealth for the shareholder. Therefore evaluating performance based on a ROI alone may not be sufficient for a manager to be short term in their focus and decision making. A specific problem is always associated with the traditional measure of performance such as ROI is that they are highly related with the share price of the organisation. Performance measures are generally implied to test the progress of organisational goal and objective. Performance should be measured and feedback should be provided on a daily basis to the appropriate individual. The primary determinant of the stakeholder is typically provided by short run financial performance measure (Ouchi, 1979).
The type of responsibility centre being examined affects the performance measure used since the manager focuses on the short term in their focus and decision making. It was found that ROI and other techniques alone are not sufficient to measure the performance. Generally EVA is related to NPV whereas ROI is related IRR. But when ROI is used along with EVA can encourage the manager to focus on the short term and help them to make decision making. Asset to be included must be specified for EVA and ROI. To measure the performance of manager only controllable asset should be incorporated in the investment base whereas to measure the economic performance normally all assets and probably proper positioning of organisational asset should be considered.
Both EVA and ROI when used as performance measure help to make a strategic decision which is the key for the investment centre which help the organisation in short term as well as in the long term. As it emphasize where the shareholder wealth is increasing or decreasing, it is also helpful for the business segment to expand or contract. Cost and revenue are well thought-out in examining the manager performance and decision making the short term (Tang, 1993).
Part BTransfer Pricing
An important feature of the decentralised organisation is responsibility centre. The performance of these centres is measure on the basis of this responsibility centre. The transfer price is refers as the price charged by one division of the organisation to other division of the same organisation for a product and services provided within the organisation. The important purpose of the transfer pricing is take a decision favourable in the decentralized organization (Williamson, 1985).
Objective of Transfer PricingBasically there are two main reasons to drive the transfer pricing system.
Properly administered transfer prices helps a firm to align the sales, pricing, production and decision making in the different department of the firm. Transfer prices educate the manager about the value of the good and services through various proper training.
The transfer price helps the firm to generate a separate profit figure which helps the manager to evaluate the performance of individual department simultaneously.
Transfer price help to promote the goal congruence (Liapis, 2010).
Transfer helps the manager to take an optimal decision whether to buy internally or externally and thus help to evaluate segment performance.
Transfer prices help to reduce the taxes, duties and tariff that are levied on multinationals
Preserve autonomy
Transfer prices in Accounting TermTransfer prices are used to examine the amount of good and service are exchanged between the different divisions within the organisation, mainly between the profit centres of the decentralised organisation. In the transfer price there is no cash exchanged between the divisions, transfer price is used only for the accounting purposes. The transfer price becomes revenue for the supplying manager whereas it becomes expense for the receiving manager. If Intra Company transfers take place, following are the item that should be eliminated to avoid any error in the financial statement are Intra- company profit in inventories, Intra company sale and cost of goods sold and intra company payable and receivables.
Mechanic of transfer pricingTransfer prices are generally taken as an expense for the buying centre and revenue for the supplying centre.
No monetary means need to change hands between the two departments of the company; it is used for internal record keeping for future use for the company (Reimann, 1988).
Alternative method of Transfer PricesGenerally Transfer price are establish by four method
Market Based Transfer Prices: The market based price is generally practised where the market is perfectly competitive and stable market for the transferred.
Full Cost Transfer Prices: Full cost is practised because of its convenience and simplicity and gives the actual picture of the outside market prices.
Cost-Plus a Mark-up Transfer Prices: Cost plus a mark up is generally practised to overcome the difficulty created between the buying and supplying division (Chari, 2009).
Negotiated Transfer Prices: Top management does not implement any rules regarding the transfer prices, department manager are advised to negotiate mutually agreeable prices.
Each of the transfer pricing method has merits and demerits.
Market Based Transfer PricesMarket based transfer prices are generally practised when the market condition is perfectly competitive and stable for the product and services that are bought and sold between the department of an organization then the transfer prices should be the market prices (Silverman, 2010).
Advantages
Market base transfer price forces selling department to be competitive in nature with the prevailing market condition.
The implementation of market base transfer prices in a perfectly stable market condition helps to achieve the goal oriented decision.
The top management are able to focus on the other financial aspect of the company due to market base transfer prices.
It helps to encourage and motivate the managers because implementation of market base transfer prices creates a sense of independence.
Market base does not punish the buying department by charging a price superior than it would have to pay on the market (Boquist, 1997).
Disadvantages
One of the major demerits of the market base transfer prices is that the prices of certain commodities may fluctuate and vary widely.
Market base transfer price may sometime pay no attention to negotiation attempt from the buying department and sell directly to the consumer which in return forces the buying division to buy from outside (Weissenrieder, 1996).
Market base depend upon the market condition i.e. competitive market or stable market.
Many time market prices are not known.
Market based transfer price may reduce chances of generating profit through collaboration
Full Cost Transfer PricesFull cost transfer prices are generally implemented when the market condition is not known, where it become very difficult to set the market price. Top management prefer a transfer prices based on the cost of producing the intermediate goods. It is generally useful when the market prices are not known or inappropriate (Thakor, 1997).
Advantages
Full cost pricing method is the most common and simple approaches of the transfer pricing method particularly when there is a situation of unstable market condition.
Full cost provides the manager an estimate of long run marginal cost which are helpful in decision making process.
Full cost pricing method is the only method which provides accurate information related to the opportunity cost. As opportunity cost is required to determine the internal transfer between the supplying and buying department (Morgan, 1997).
Disadvantages
Full cost transfer prices is generally follow rule which in return fail to preserve the subunit autonomy.
Buying decision forced to take sub optimal decision as buying division regard transfer prices wholly as variable cost.
Evaluation of sub unit level are not determined as it fail to evaluate their performance due to many time transfer price fail to exceed full cost.
There is no proper distinction between fixed and variable cost are established.
Since full cost transfer pricing are passed on it fails incentives to control asset and expenditures.
Cost-Plus a Mark-up Transfer PricesCost plus a mark up transfer pricing refers to setting the prices at the production cost and with a certain profit margin. The mark up indicates the profit margin. Cost plus pricing is a increase in the price that is added to the actual cost of providing the good and services. Cost plus method work best when the buying and selling department does not know about the actual cost of production but agree on the profit over and above the cost of the product (Chen and Dodd, 1997).
Advantages
It is very simple and easy to apply as it purely based on the cost data.
Mark up can be customized according to the requirement based on the industry standard or individual expert opinion.
Cost plus method does not take into account of prices of the markets whether it is going up and down.
Cost plus mark up pricing method make sure that you will not going to sell at a loss, it generally provide a platform for the lowest prices acceptable.
It reduces risk and uncertainties associated with the setting the prices within the organisation.
Disadvantages
Business that cannot able to set the cost accurately may set transfer prices at a level which fail to cover the actual cost production (Reimann, 1988).
Cost plus pricing takes only cost and profit side of buying and selling and it ignore the demand part.
The figures that are generated are based on the assumption of production and sale numbers.
One of the major drawbacks of the mark up pricing method it fails to give the actual picture of the competition.
Cost allocation is arbitrary.
Negotiated Transfer PricesNegotiated transfer prices take place from the outcome of a bargain procedure between the buying and selling department. Rarely, subunit of a company is free to negotiate the transfer price within them and then make a decision whether to buy and sell internally or externally. Negotiated transfer prices are implemented when the market prices are volatile (Lehn and Makhija, 1996).
Advantages
Negotiated transfer prices provide better information of the cost and benefit of the product and services
In a situation of market imperfection for the intermediate product and when the top level managers have equal bargaining power, negotiated transfer prices are useful.
Manager become aware of the cost of product and services which help to generate the profit for the organisation.
Negotiated transfer prices generally preserve autonomy of the department, which is reliable with decentralisation.
Disadvantages
One of the major drawback of the negotiated transfer prices is that it is time consuming
The driving factor for negotiation is influenced by the bargaining qualities of the department manager.
Sometime supplying department has bargaining disadvantage as imperfect market exists.
Negotiated transfer prices may sometime leads to sub optimal decision problem (Stewart, 1991).
ConclusionTransfer price may sometime become pertinent in the circumstance of other rigid issues, it often complicated by imperfect or nonexistent of intermediate market (Gox, 2000). Through an analysis it can be concluded that variable cost can be used as transfer prices but it would not often appropriate to deal with other issues related with managerial skill. Therefore different kinds of transfer prices are allocated to each of the division.
References
Bacidore, J. M., Boquist, J. A., Milbourn, T.T., and Thakor, A.V. (1997). The Search for the Best Financial Performance Measure. Financial Analysts Journal, 11-20.
Chari, L. 2009. ‘Measuring value enhancement through Economic Value Added: Evidence from literature’, IUP Journal of Applied Finance,15(9): 46–62
Chen, S., and Dodd, J. L. (1997). Economic Value Added (EVATM): An empirical examination of a new corporate performance measure. Journal of Managerial Issues, 9(3), 318 – 333. Economist (1997). Valuing companies: A star to sail by. The Economist, 57 – 59.
Gox, R. (2000) Strategic transfer pricing, absorption costing, and observability, Management Accounting Research, 11, 327-348
Lehn, K., and Makhija, A. K. (1996). EVA and MVA: As Performance Measures and Signals for Strategic Change. Strategy and Leadership, 34 – 38.
Liapis, K.J. 2010. ‘The residual value models: A framework for business administration’. European Research Studies,XIII(1)
Morgan, D.L. 1997. Focus Groups as Qualitative Research (2nd edition). London: Sage Publications.
Nuelle, F. (1996). The two faces of EVA. Chief executive, 39.
Ottoson, E., and Weissenrieder, F. (1996). Cash Value Added – a new method for measuring financial performance. Gothenburg Studies in Financial Economics, No. 1. [Online] Available:http://www.anelda.com/ (Retrieved from April 10, 1999)
Ouchi, W. (1979) A conceptual framework for the design of organization control mechanisms, Management Science, 25, 833-848.
Reimann, B. C. (1988). Managing for the Stockholder: An Overview of Value-Based Planning. Planning Review, 16(1),10 – 22.
Silverman, H.I. 2010. ‘Valuing technology stocks with EVA(TM): A bridge too far?’, Journal of Business Case Studies,6(2): 9–20.
Stewart, G. B. (1991). The Quest for Value: A Guide for Senior Managers, Harper Business, New York.Van Horne, J. C. (2002). Financial Management and Policy, Pearson Education Asia.
Stewart, G. III. 1990. The Quest for Value. New York: Harper Collins Publishers.
Stewart, T. (1993) The new face of American power, Fortune, July 26, 72
Tang, R. (1993) Transfer pricing in the 1990s: tax and management perspectives, Westport, Conn., Quorum Books.
Williamson, O. E. (1985) The economic institutions of capitalism: Firms, markets, relational contracting, New York, Free Press.