An intra-company pricing system in decentralized organizations

Abstract

Intra-company pricing is regarded as an essential part of a decentralized profit control system in any company where divisions buy from and sell to each other. Along with the spread of the use of decentralization or divisionalization as a means of controlling corporation, the theory and application of pricing for intra-company transfers have been a popular topic in recent accounting literature.

Several questions are to be raised and answered in relation to the subject of intra-company pricing. First, how can one measure the performance of divisions. Second, what are the bases for transferring the products between divisions 7 Third, what are the theoretical arguments for these methods 7' Are there any limitations to each method 7 Fourth, if there are many suggested methods for intra-company pricing, what would be the best method for us to use?