[MEET 10] AKUNTANSI MANAJEMEN - HARGA TRANSFER

Summary

In this management accounting lecture, the concept of transfer pricing is explored, focusing on how one division within a company sets prices for goods or services sold to another division. Key topics include the definition and application of transfer pricing, its impact on company profit, objectives like performance evaluation and tax benefits, and related policies such as minimum and maximum pricing. Through a practical example of PT Aqua, the speaker illustrates the balance between internal and external pricing, highlighting how transfer pricing affects both division profitability and the company's overall financial strategy.

Takeaways

• 😀 Transfer pricing refers to the price set by a selling division when selling products or services to a buying division within the same company.
• 😀 Transfer prices are usually lower than market prices when internal divisions trade goods to avoid external purchases and maintain cost efficiency.
• 😀 The transfer price is set based on the interests of both the selling division (who wants higher prices for more revenue) and the buying division (who seeks lower prices to reduce costs).
• 😀 Transfer pricing is only applicable in companies with profit centers or investment centers, where each division has control over its revenue and costs.
• 😀 The cost of goods transferred between divisions is considered revenue for the selling division and a cost for the buying division.
• 😀 A key goal of transfer pricing is to align divisional actions with the overall profit goals of the company, ensuring that the company's total profits are maximized.
• 😀 If the selling division prices too high internally, it may hurt the company's overall profitability compared to external market prices.
• 😀 The purpose of transfer pricing includes accurate performance evaluation, goal alignment across divisions, and management autonomy to make decisions within each division.
• 😀 Transfer pricing policies include minimum and maximum price guidelines to ensure that divisions do not face losses. The minimum price prevents the selling division from losing money, and the maximum price ensures the buying division doesn’t incur higher costs than external market prices.
• 😀 When divisions are not operating at full capacity, the minimum transfer price can be set based on the variable cost, while the maximum price is determined by external market prices.
• 😀 Companies need to balance internal transfer prices to avoid losing money on both sides, while ensuring that the overall company's profits are maximized, especially in multinational corporations with different tax rates.

Q & A

What is transfer pricing in the context of management accounting?

Transfer pricing refers to the price set by a selling division within a company for goods or services sold to a purchasing division. It is used to determine the cost of internal transactions between divisions of the same company.

How does transfer pricing apply to a company like PT Aqua?

In PT Aqua, one division produces plastic bottles (the selling division) while another division handles the sale of bottled water (the purchasing division). The selling division sets a transfer price for the plastic bottles when they are sold internally to the purchasing division.

What are the main objectives of setting transfer prices in a company?

The main objectives of setting transfer prices are to evaluate divisional performance accurately, align divisional goals with the overall company goals, and maintain management autonomy within divisions while ensuring their actions contribute to the company’s success.

How does transfer pricing affect the profitability of a company?

Transfer pricing directly affects a company's profitability by influencing the revenue of the selling division and the cost of the purchasing division. If the transfer price is set too high or too low, it can negatively impact the overall profits of the company.

What impact does transfer pricing have on tax management, especially for multinational companies?

For multinational companies, transfer pricing can help optimize tax management by adjusting the prices at which goods and services are transferred between subsidiaries in different countries. This strategy allows the company to minimize tax burdens by taking advantage of varying tax rates in different jurisdictions.

What is the role of a selling division in setting transfer prices?

The selling division sets the transfer price based on the costs of production, market prices, and the financial interests of the division. The price is set in a way that allows the selling division to cover its costs and achieve a profit, while not overcharging the purchasing division.

What factors influence the price set by the purchasing division for internal transactions?

The purchasing division aims to minimize costs, so it prefers a lower transfer price. However, it also considers whether purchasing internally or externally will be more cost-effective, factoring in the cost of production, available capacity, and market prices.

What is the 'breakeven' pricing strategy in transfer pricing?

Breakeven pricing occurs when the transfer price set for internal transactions ensures that the revenue of the selling division matches its costs, and the purchasing division’s costs match the price paid. This results in no overall profit or loss for the company from the internal transaction.

What is the minimum transfer price and why is it important?

The minimum transfer price is the lowest price at which the selling division can sell a product internally without incurring a loss. It is typically based on the variable costs of production and ensures that the selling division does not operate at a loss.

How does the maximum transfer price differ from the minimum transfer price?

The maximum transfer price is the highest price the purchasing division is willing to pay for an internally transferred product without incurring a loss. It is often tied to the external market price for the product, ensuring the purchasing division does not pay more internally than it would pay in the open market.