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Assignment #2 on-line
Company Context:
a medium-sized, vertically integrated paper company, producing white and kraft papers and paperboard has four producing divisions and a timberland division, which supplied part of the companys pulp requirements If I were to price these boxes any lower than $480 a gross, said James Brunner, manager of Birch Paper Companys Thompson Division, Id be countermanding my order of last month for our sales force to stop shaving their bids and to bid full cost quotations. http://investing.businessweek.com/businessweek/rese arch/stocks/private/snapshot.asp?privcapId=9206565
Northern Division designed a special retail display box for one of its finished papers in conjunction with the Thompson Division, which was equipped to make the box. Transfer Price Decision: Bids: 1) Thompson (internal) - $480.00 (20% rate)
buys from Southern division (70% of $400 cost) Southern costs are 60% of transfer/selling price
2) West Paper Co. (external) - $430.00 3) Erie Papers Inc. (external) - $432.00
Plus purchases i) $90 per box from Southern and ii) $30 from Thompson (25% is variable)
Issues:
Transfer
Excess
Pricing
capacity
Evaluation
organization
What are the additional costs to Birch Paper Company if Northern buys the boxes from West or Erie, rather than from Thompson?
480.00 $ $
$ $ $
Does the present system motivate Mr. Brunner in such a way that actions he takes in the best interests of the Thompson Division are also in the best interests of the Birch Paper Company? Explain.
Transfer price should allow for goal congruence profit (internal) for divisions and profit (external) for company overall In the absence of specific orders from top management, Kenton would accept the lowest bid, namely, that of West Paper for $430
it is possible for top management to order the acceptance of another bid if the situation warranted such action the volume represented by the transactions in question was less than 5 percent of the volume of any of the divisions involved
Midterm Results
Average: 55.46/75 or 74% Hi: 72/75 or 96% Lo: 15/75 or 20% Normal Distribution of grades Comments:
Relate comments to scenario Expand discussion even with limited time and spacing Avoid dumping