A recent proposal by the Secunties and Exchange Commission would require conglomerate companies to issue income statements on a divisional basis. Evaluating this proposal, the authors indicate that, although this form of reporting is feasible in the case of the pure conglomerate, it may be difficult in a case involving substantial interdivisional relationships and jointly used corporate capacities. They argue that the highly diversified firm must optimize the use of scarce economic capacities (resources) used jointly by its various divisions; orthodox accounting statements are not designed to reveal the results of this planning procedure. The dual of the linear programming problem is utilized in order to determine internal (shadow) prices of the jointly used corporate resources in such a way that goals and preferences of the overall corporate management center are realized.
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