9.2.4.1.3 Transfer price
In BASF Group, Business Units are responsible for profit and for return on investment (profit centers), each reporting to an Operating Division. Products within a company of BASF Group that are supplied from one profit center to another for further processing or for sale (i.e. they leave the boundaries of the particular Business Unit or Operating Division) should as a basic rule be charged within the arm’s length principle establishing the downstream unit as a privileged partner. These supplies are therefore charged at transfer prices. Long-term effects of transfer price agreements on business developments and the strategy of upstream and downstream profit centers are taken into account in transfer pricing. BASF’s ZZ clearing desk is responsible for resolving transfer price definition and calculation disputes. As per clearing desk step wise process for calculation of transfer price is defined, which will be used for calculation of transfer pricing. The process cannot be mentioned in this thesis because of confidentiality reasons, and only a general review of approach will be explained.
BASF’s product which is under business case evaluation comes from a business unit called EV and EV is not producing the chemicals needed for BASF’s innovation chemistry by its own. Hence EV will need to source the chemical from another business unit called EM. During this the product will be charged at transfer price as per BASF transfer price guidelines. Using the ‘Transfer Price calculation method selection’ (proposed my BASF’s ZZ) we can conclude that EV will qualify for cost plus transfer pricing. Referring BASF’s recent cost plus methodology (applicable from January 2014) and adapting it to our situation it can be said ...
... middle of paper ...
...ology, but presumably they can indeed not offset the cost incurred in carbon storage. Hence overall the economics are negatively contributed (36). Although this doesn’t factor-in significantly in the growth or fall of CO2-EOR projects still it has reasonable contribution in putting a foundation for the future of such a technology.
9.2.4.4 Summary of Financial Check
For business case of CO2-EOR, the results of this stage will be as following:
• Low but positive NPV and ECV numbers.
• Long term EBIT and contribution margin positive.
• NPV sensitivity analysis shows that most sensitive factors are Selling price, transfer price and volumes. And as we see that volumes are low so evening having good contribution margin will not help.
• CO2-EOR business highly sensitive to economic drivers.
Overall financials for this project look good and can be graded as above average.
In order to find out what are some of the key drivers’ of the analysis I will further run different sensitivity analysis. I think some of the key drivers of our assumptions could be sales growth, production costs as a percentage of sales, inventories as a percentage of cost of goods sold etc.
The issue presented in this paper is how one can aim to reduce the amounts released, and what the best ways to solve this problem are. This has been long debated amongst scientists, businessmen, Industry-owners, and politicians amongst many other eminent figures in society. The four major approaches to reducing carbon dioxide in the atmosphere include: subsidies of alternative energy, cap and trade, carbon taxes, and command and control regulation. We will examine and compare the effectiveness of two of these methods: The carb...
This pdf file states both the problem of Carbon Dioxide emissions as well as some future methods to capture and store these emissions. It also states the harmful effects Carbon Dioxide can have on the environment and how these effects can be reduced through methods used in the future such as using carbon negative or more energy efficient and conservation practices. It can therefore not be considered as to being bias in either the for or against direction. The coordinating author and leading authors who were responsible for this source are simply stating the facts, which are well referenced by other professionals in the field, in order for the reader to receive the best and most honest information. By stating both the reality of the problems that Carbon Dioxide can have on the environment as well as a variety of future solution methods, makes this source neither ...
First and foremost, in order to make any difference in the amount of C02 in the environment, low/no-carbon technology must be developed and implemented. This can’t be done without money however, and that is something greatly lacking for this cause. Both the government and the people have to support the fight against greenhouse gasses...
It was the year 1987 when the Gartner Group popularized the form of full cost accounting named Total Cost of Ownership (TCO)(author, Gartner Total Cost of Ownership). Originally TCO was mainly used in the IT business sector. This changed in the 1980’s when it became clear to many organizations that there is a distinct difference between purchase price and full costs of a products ownership. This brings us towards the main strength of conducting a TCO analysis, besides taking the purchase costs into account, which consist of the amount a money an organization pays for the required service, product or capital outlay. It also considers 1. Acquisition costs; these can consist of sourcing, administration, freight, and taxes. 2. Usage costs, which consists of the costs associated with converting the given product or service into a finished product. And finally 3. End of life cycle costs; the costs or profits incurred when disposing of a product. TCO can be seen as a form of full cost accounting; it systematically collects and presents all the data for each proposed alternative.
BASF is one of the world's largest chemical companies. It was established in 1865 with the main product was coal tar based dyestuff. It has six main categories of products, which are oil and gas, chemicals, agricultural products, plastics and fibers, dyestuff and finishing products, and consumer products. The structure of the company is presented by three-dimensional matrix consisting of operating, regional and functional divisions. Since 1960, the company began to expand its operation at a global level through acquisition. In Southeast Asia, the company has over 30 companies in 16 countries through the region of which 12 have the production facility. Headquarter for the region is located in Singapore.
The contained paper has been prepared with objectives of elaborating over the three different costing methods namely, Absorption/Full Costing, Variable/Marginal Costing, and Activity Based accounting. The first segment of the report seeks to define and illustrate the costing methods based on the personal understanding of the writer gained through the class room and the academic readings. Part two of the report takes a form of short essay, written critically to evaluate the application of standard costing and variance analysis to any size of business, and concludes with a verdict that whether or not standard costing and variance analysis is applicable to each business with consideration of its costs and benefits of the system.
As such, there is material cost regulator, manufacturing control, labor cost regulator, excellence control and so on. Conversely, control over the price is implemented through the methods of financial control and typical costing (Meigs, 1998). The control methods aid the management in understanding the operating competence of a firm. Cost accounting also determines the selling price. The intention of all business firms is minimizing costs and maximizing profits. The costs incurred in producing goods and services may be reduced through incorporating alternate but cheaper resources of
To test the financial feasibility and plan acceptability, there must be information on the magnitude, and share of estimated project cost that are reimbursable. This information can be derived from cost allocation. Also where cost sharing is required in the multipurpose planning process cost allocation can be applied. Cost allocation also provides information necessary for allocating the real expenditures ensuring that the cost account are maintained in line with plan formulation and allocation principles during the subsequent c...
Transfer pricing could be defined when a company trades goods/services and the allocation of profits and taxes with another sub-unit of the same company in a different country (Matt Barbella 2011). The four major aims of transfer pricing is to provide information for making good economic decisions, provide information for evaluating the divisional performance, promote congruence and sub-unit autonomy. There are three major types of transfer pricing method that firms use to transfer goods/services. These methods are market-based transfer prices, negotiate transfer prices and cost based transfer prices. Although there are four major aims of transfer pricing, there is no actual transfer pricing method which fulfils the four purposes. Therefore managers are forced to make a choice to which purpose is to be fulfilled or to which method is to satisfy the objective at hand. For example, if a manager is to choose a method such as marginal cost transfer pricing, it motivates the short run optimal economic decision of the manager but undermines the concept of autonomy.
And sometimes, unexpected inaccuracy like plants release more carbon dioxide than we expect can happen. Do you really think this is a trustworthy strategy? There are way more well attempts made, such the Emissions Reduction Fund, carbon taxing and regulating the closure of coal-fired power stations. These all have the potential to cause political and economic loss due to the lack of
Defining the revenue model of the business and also judging how to price the products and technologies that are manufactured by the business are the most crucial part in development of products and tools. Finally the business model is includes by pricing the products and technologies and the revenue model which effects the marketing decisions by means of the customer service decisions.(2) The revenue model is used for middle and lengthy period estimates of a company’s revenue process and procedures and also by what means a business is going to get income, profits and produce more returns on what a business has invested.(3) The effect of revenue model and set a price judgments are difficult and have a basic effect in what way the business is going to operate. Every business is going to have their own innovative revenue model.
The past century is known for the incredible advancements that took place in technology, government policy, human connectivity, and basically in the development of society. Many of these awe inspiring feats of mankind have come at too high of a cost. As a result of the industrial revolution, and other misuses of the Earth’s resources, mankind has caused a concerning alteration in the natural processes of the planet. In order to maintain the wellbeing of the international community as the effects of global warming increase in severity and occurrence, governments should turn to climate engineering to keep a healthy balance between society and the planet. Climate engineering practices such as carbon sequestration
Activity-based costing (ABC) is a costing method that is designed to provide managers with cost information for strategic and other decisions that potentially affect capacity and therefore “fixed” as well as variable costs. Activity-based costing is mostly used for internal decision making and managing activities while traditional costing method is used to provide data for external financial reports. Most organization uses activity-based costing as an addition system for using traditional absorption costing as sometimes the traditional cost system misleads the product’s profitability. In a company, there are many products on sale, if one product is sold at a high price with low product margin and a product with high product margin at a low price, it may result in a loss. In addition, due to the reason that cost drivers and enterprises business may change, activity-based costing analysis also needs to be revised periodically. This amendment should be prompted to change pricing, product, customer focus and market share strategy to improve corporate profitability.
In conclusion, while the shift in demand curb can result from several sources, the quality of service, the tastes or even the number of buyer as presented here represent the main reason of the shifting price of an activity as the sell of ice-cream on campuses. As a businessman we should take in consideration those factors in order to be successful and trying to anticipate our rise or fall to stabilized our business. On another hand, keep in mind The most famous law in economics: “when the price of a good rises, the amount demanded falls, and when the price falls, the amount demanded rises.”