Another Look at Transfer Prices for Depot-Level Reparables - Marginal Costs: A Revenue Perspective

Abstract

Full-cost transfer prices for DLR components on weapon systems contribute to the readiness problems now facing DoD. DLR transfer prices are set to recover the working capital funds' total cost of repairing, replacing, transporting, warehousing, and managing DLR components. However, our analysis of those full-cost DLR transfer prices indicates that instead they systematically under-collect revenues needed to buy and repair DLRs. Our research, like other published research literature, advocates the use of marginal-cost transfer prices for DLRs. Using marginal-cost transfer prices would help correct some of the uneconomic behaviors we found. However, a far more compelling reason for such a change would be to lessen the effect on revenue recovery associated with problems in estimating DLR sales, in budgeting customers DLR funding, and in anticipating customers' reaction to new DLR prices.

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Document Details

Document Type
Technical Report
Publication Date
Jan 01, 1999
Accession Number
ADA360143

Entities

People

  • Caroline Nelson
  • Dale A. Kem
  • John M. Wallace

Organizations

  • LMI

Tags

Communities of Interest

  • Biomedical
  • Human Systems
  • Weapons Technologies

DTIC Thesaurus Topics

  • Accounting
  • Air Force
  • Air Force Facilities
  • Business Administration
  • Department Of Defense
  • Logistics
  • Logistics Management
  • Maintenance
  • Maintenance Personnel
  • Management Personnel
  • Money
  • Organizational Structure
  • Recovery
  • Repair
  • Repair Shops
  • Storage
  • Weapon Systems

Readers

  • Economics
  • Logistics and Supply Chain Management.