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This study aims to analytically explore the economic role of transfer pricing in a vertically integrated supply chain with a direct channel, specifically when it uses cost-based transfer prices, as is frequently observed in management practices. We compare two representative transfer pricing methods: full-cost and variable-cost pricing. Although many firms open a direct channel, which affects the optimal decision on transfer prices, prior literature has not considered this case.

We demonstrate the results using a non-cooperative game theoretical approach.

The results show that full-cost pricing is more profitable than variable-cost pricing when the fixed cost allocation to the marketing division is low, contrary to the established position in prior studies, from which I select their benchmark case. Moreover, we obtain a counterintuitive result, whereby, the firm-wide profit of a vertically integrated supply chain increases with fixed cost allocation.

This study considers the direct channel and internal transfer pricing in a vertically integrated supply chain, while prior research only considers one or the other. This model suggests an optimal choice of cost-based transfer pricing in managerial decisions. In addition, the authors demonstrate the positive effect of increasing fixed cost allocation, which prior management studies do not show. The findings of this study have implications for managerial practice by providing insights into supply chain design and showing that firms should consider the competition between channels when making decisions about transfer pricing methods.

The purpose of this paper is to report on the incidence of the choice between full‐cost and variable‐cost pricing, and to examine the factors that could possibly influence this choice. The findings indicate that whereas 74,5% of the firms use full cost for pricing their products, only 25,5% use variable costs. The research provides evidence that supports the size of the company, product type, stage in product lifecycle, materiality of fixed overhead costs and the objectives of the company as significant variables influencing the choice of the cost base for product pricing.

This classroom activity helps students tie together the concepts of absorption costing for inventory, selling and administrative (SA) cost calculations, and sales price decisions. It shows students how all costs fit together and are used to make business and pricing decisions, synthesizing discrete sections of most managerial or cost accounting books into a complete process. The activity is designed to be run in one 75-minute class session using an Excel template that allows students to focus on business decisions and less on the mechanics of completing calculations. The seven segments of the activity have students calculate target cost, allocate items of overhead into production and service departments, calculate absorption product cost, allocate SA to the production departments, determine the full cost, evaluate product viability, and calculate target price. At the end of the activity, students better understand how all these cost items fit together in a manufacturing setting.

Preface The functions of business divide into several areas and the general focus of this book is on one of the most important although least understood of these—DISTRIBUTION. The particular focus is on reviewing current practice in distribution costing and on attempting to push the frontiers back a little by suggesting some new approaches to overcome previously defined shortcomings.

This paper presents the results of an investigation into the relative costs of part‐time and full‐time education at Colleges of Advanced Education. Estimates of the relative net private, social, and institutional costs indicate that the private and social costs of part‐time education may be significantly below those of full‐time study, but that the institutional costs may be higher. However, differential rates of attrition may influence the estimates made, as would the value placed upon the leisure foregone by part‐time students.

The aim of this paper is to investigate the effect of information asymmetry on revenue sharing contracts and performance in a dual-channel supply chain. First, the authors model the optimum revenue sharing contract in a dual-channel supply chain under both the full information case and the asymmetric information case. Second, they contrast the optimal decisions of a dual-channel supply chain between the full information case and the asymmetric information case. Third, they explore the impact of asymmetric cost information on the performance of a dual-channel supply chain and investigate the information value.

The authors present two main issues associated with revenue sharing contracts to alleviate manufacturer–retailer conflicts in a dual-channel supply chain. In the first issue, a revenue sharing contract is designed in a dual-channel supply chain under asymmetric cost information conditions, based on the principal-agent model. In the second issue, an optimal revenue sharing contract under full information conditions, based on the Stackelberg game is discussed. They explore the impact of asymmetric cost information on the performance of a dual-channel supply chain and investigate the information value based on comparative static analysis.

First, the direct sale price is unchanged and independent of the retailer’s cost construct, but the wholesale price increases and the retail sale price does not decrease under asymmetric cost information. The information asymmetry leads to higher direct sale demand and lower retail sale demand. Second, information asymmetry is beneficial for the retailer, but imposes inefficiency on the manufacturer and the whole supply chain. Third, the performance of the dual-channel supply chain is improved if the retailer’s cost information is shared and the dual-channel supply chain reaches coordination. The retailer is willing to share its cost information if the lump sum side payment that the manufacturer offers can make up the retailer’s reduced profit due to sharing this information.

The authors proposed a contract menus design model in a dual-channel supply chain. They examine how information asymmetry affects optimal policies and performance. They compared the optimal policies under symmetric information and asymmetric information. Conditions under which the partners prefer sharing information are identified. They quantified the information value from the points of partners and the whole system.

To make resource‐related decisions in a way that maximizes an organization's effectiveness and promotes its mission, nonprofit leaders need to have a clear picture of the full costs of operating their programs and services.

The authors studied individual nonprofits and confirmed their findings by interviewing their executives.

While most nonprofits have a good understanding of the direct costs incurred by their programs, many don't account for indirect costs. Full cost data can provide invaluable input to decisions about how to allocate resources among programs, whether to expand into a new location, and what level of funding is required to sustain the organization's operations.

Larger studies are needed to confirm whether nonprofit executives conclude that investing in more accurate cost accounting provides a substantial payoff.

Resource‐allocation decisions based on accurate cost data present nonprofit executives with their best opportunity to concentrate resources on activities that will effectively achieve their organizations’ goals.

Corporate executives who volunteer to help nonprofits need to be aware that the financial data needed for strategic decision making often isn't available. Moreover the culture of the nonprofit sector resists adopting accounting systems that measure true costs.

Regulators can adjust penalties to compensate for incomplete monitoring of regulated parties that are subject to legal rules, but compensating penalty adjustments often are unavailable when regulated parties are subject to legal standards. Incomplete monitoring consequently invites greater noncompliance under standards than under rules. This chapter develops a model that quantifies some of the specific tradeoffs that regulators face in designing standards regimes under incomplete monitoring. The model also considers the extent to which suboptimal compliance due to incomplete monitoring is likely to result in deadweight loss in different settings.

While the gap between economic theory and companies’ practice, regarding to the pricing setting, has been extensively explored and explained, the new gap between the marketing normative view and companies’ practice needs further clarification. In this way, the paper aims to investigate whether marketing researchers’ claim that the use of cost-based price approach prevails over the use of value-based price approach is pertinent.

The paper is guided by the following research question: “Does price-setting based on cost plus margin go against the value-based price approach?” The answer to this question is grounded in reflections on results of previous research studies and in a case study conducted in an industrial company. Because of the qualitative focus of the present study, hypotheses are not established, but rather the following proposition: certain companies use the mechanics of cost plus margin in the sale price-setting process, but it does not necessarily mean that these companies set prices based on cost.

The arguments, propositions and the case study findings provide the logical sequence and the support required to conclude that price-setting based on cost plus margin does not always conflict with the value-based price approach. As a result, it may be claimed that the general proposition established is theoretically valid, i.e. using a price formula that contains the elements cost and margin does not necessarily mean that the company sets prices based on cost.

The key contribution of this paper is demonstrating that in certain business environments, such as, B2B, using the price formation mechanics based on cost plus margin is the way found by companies to enable the approach adopted. The approach may be cost-based or value-based price. This is the first study that explicitly reveals how B2B companies may set prices based on value while simultaneously preserving the simplicity of cost plus margin formulas. Researchers have significant misconceptions about these formulas: in previous studies, they classified all price-making companies as those adopting the cost-based price approach simply because they used formulas containing the element cost.

Benchmarking is a management tool that promotes process improvement. By comparing service units across jurisdictions, best practices can be identified and used to enhance less efficient and effective operations. However, the lack of generally accepted criteria to compare service costs for local government has hindered benchmarking initiatives. One of the key components of the North Carolina Local Government Performance Measurement Project (NCLGPMP) is the full-cost accounting model developed to ensure that localities employ the same methodology to collect and report cost data associated with performance measures. This article presents an overview of the development and implementation issues associated with that model and highlights the areas of direct costs, indirect costs, and capital costs. It is argued that accuracy and comparability of performance and cost data are the fundamental ingredients of a benchmarking and performance measurement project.