Siemens Electric Motor Works (B): Pricing Interdivisional Sales

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Siemens Electric Motor Works (B): Pricing Interdivisional Sales

Supplement

Reference no. 9-189-090

Subject category: Finance, Accounting and Control

Authors: Karen Hopper Wruck (Harvard Business School)

Published by: Harvard Business Publishing

Originally published in: 1988

Version: 27 December 1989

Length: 10 pages

Data source: Field research

Topics: Cost allocation; Cost systems; Organizational structure; Transfer pricing; Profit centers; Prices; Production; Business processes

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Abstract

Examines Siemens' policy for pricing products transferred between the manufacturing and sales divisions of their Electric Motor Works, where both are profit centers. It is unique in that the organizational linkage between the product costing system and the transfer pricing system is highlighted. The issues raised center around the behavior induced by the transfer pricing system coupled with each manager's incentive to increase divisional profits. In addition the students will have an opportunity to discuss the appropriateness of both the transfer pricing system and the profit center structure of the organization.

Location:

Germany

Industry:

Manufacturing

Size:

DEM400 million

Other setting(s):

1988