Management Control System: Sample Questions

The aims of Transfer Pricing are to promote goal congruence, autonomy, and motivation among different units within the organization. The features include setting fair prices, minimizing costs, and complying with tax regulations.

The objectives of Transfer Pricing include performance evaluation of profit centers, goal congruence, and ensuring optimal allocation of resources.

The methods of determining Transfer Price include cost-based methods (e.g., variable cost, full cost), market-based methods, and negotiated methods.

Profit centers are segments within a company responsible for both revenues and expenses. They offer advantages such as better performance evaluation but may also face disadvantages like potential conflicts of interest.

Profit centers' profitability can be measured by comparing their actual profits with the budgeted profits. For example, if a profit center's actual profit exceeds the budgeted profit, it indicates good performance.

A Responsibility center is a unit in an organization responsible for specific activities. The evaluation process involves comparing actual performance against predetermined goals to assess accountability and performance.

The primary objective of transfer pricing is to facilitate goal congruence between different responsibility centers of an organization.

The two-step transfer pricing method involves setting two different transfer prices: one for tax purposes and another for managerial purposes. It can be used when there are conflicting objectives of minimizing taxes and promoting goal congruence.

Goal congruence refers to the alignment of individual or subunit goals with the overall organizational goals. Factors affecting goal congruence include transfer pricing policies, performance evaluation and reward systems, organizational culture, and communication.

Strategic planning is the process of defining an organization's strategy or direction and making decisions on allocating resources to pursue this strategy. Strategy formulation is the specific process of determining the appropriate course of action to achieve organizational goals and objectives.

A responsibility center is a segment of an organization whose manager is accountable for its activities and results. The main types of responsibility centers are cost centers, revenue centers, profit centers, and investment centers.

Management control systems in multinational companies are more complex due to factors like cultural differences, varying legal and regulatory environments, currency fluctuations, and the need for coordinated decision-making across different regions or countries.