Case on Strategic Cost Mgt

ACase of

Transfer pricing in a multinational corporation-Del Notre Paper Company

Presented By :Priyank ShahMehul GadhiyaSachin NandhaPravin KothariMrunal Vaza

Summary Del Norte paper company was a large integrated

manufacturer in U.S. DNP-Deutschland was a subsidiary of DNP-Italia. The African Bid. Reasons for DNP-mill price was higher.

• Different prices for domestic & international market.

• Profit added to the converting plant’s profit.

• Profit decided on the basis of full allocation.

• If commitment fails then converting plant will bare the charges of mill down proportional cost.

Transfer pricing• Transfer pricing is the set of rules an

organization uses to allocate jointly earned revenue among responsibility centers

• The Transfer price should be similar to the price that would be charged if the product were sold to outside customers or purchased from outside vendors

• Can be arbitrary when a high degree of interaction exists among the individual responsibility centers

Approaches to Transfer Pricing

• Organizations choose among four main approaches to transfer pricing:– Market-based transfer prices

– Cost-based transfer prices

– Negotiated transfer prices

– Administered transfer prices

• the goal of using transfer prices is always to motivate the decision maker to act in the organization’s best interests

International transfer pricing

• International transfer pricing is the pricing that an organizations uses to transfer products between a unit in one country and unit ion another country.

• Transfer are not at arms length.

• Taxation.

• Quota

Administered Transfer Price

• Del Norte Paper Co.

K.E

.A

Is it a cartel or Strategic Alliance????