Bhimani, Horngren,
Datar and Rajan,
Management and Cost Accounting, 5
th
Edition, Instructor’s Manual
© Pearson Education Limited 2012 for secrecy (with plenty of opportunity for number crunching) through an innovative TP role play based on the cases in the book.
Example Companies may use different TP methods for different items market-based TP for big ticket items, variable cost-plus for low-value items and periodic negotiations for midrange items. Companies may
also allocate more purchasing, receiving and inspection costs to externally sourced items, if internal sourcing requires less of such activities (e.g. buying internally may require less negotiation and an internal source maybe more reliable in delivering high-quality items in the right quantity at the right time. Recognising any extra costs from sourcing externally renders internal sourcing relatively more attractive.
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