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Medoc Company

Introduction

Medoc Company is faced with some problems in its transfer pricing policy between 2 of its 15 investment centres within the firm, namely the Milling Division and the Consumer Products Division. The transfer price set by the firm actually created some friction between these 2 divisions. Dealing with warehousing, shipping, billing, advertising and other sales promotion efforts for the consumer products and a fraction of the flour produced by the Milling Division, the Consumer Products Division complained that it was charged an inappropriate cost for all the items transferred from the Milling Division and thus it had little motivation to pursue more aggressive marketing efforts given that it had to do it at the expense of reducing its own average profit margin. And there are still several other complaints from the Consumer Products Division in relation to this as well.

The transfer price charged to the Consumer Products Division was based on the full cost approach where every unit was charged at actual cost including material, labour, variable overhead and non-variable overhead with an additional charge of 75 percent of the investment in Milling Division. This caused three main identifiable problems:

Managers goals are not aligned with the companys goal as Consumer Products Division.

the cost behaviour is altered after transferring to the

Consumer Products Division's is charged 75 percent of investment had no control over Milling Division.

of Milling Division despite the fact that they

The inefficiencies of the Milling Division could be passed transfer prices charging at actual cost.

on to the Consumer Products Division through the

To solve these problems, the firm had examined different transfer pricing approaches but it was hard to decide on which method to use due to the different compositions of the products and the market price of is not readily available and could not be measured accurately.

A Empresa Medoc confrontada com alguns problemas na sua poltica de preos de transferncia entre dois dos seus 15 centros de investimento dentro da empresa,

nomeadamente a Diviso de triturao e a Diviso de Produtos do Consumidor. O preo de transferncia definido pela os empresa realmente esforos de criado alguns atritos entre

essas duasdivises. Lidar com

armazenagem,

expedio, faturamento,

publicidade eoutras vendas promoo para os produtos de consumo e uma frao da farinha produzida pela Diviso de fresagem, a Consumer Products Division se queixou de

queera cobrado um custo inadequado para todos os itens transferidos da Moagem diviso e, portanto, tinha pouca motivao para prosseguir os esforos de marketing maisagressiva j que tinha que fazer isso custa de reduzir a sua prpria margem de lucromdia. E ainda h vrias outras queixas da Diviso de Produtos de Consumo em relao a este bem.

O preo de transferncia a cargo da Diviso de Produtos de Consumo foi baseada naabordagem de custo total, onde cada unidade foi cobrado no custo real incluindo a sobrecarga, material, trabalho varivel e no varivel em cima com um custo adicional de75 por cento do investimento na diviso de fresagem. Isso causou trs principaisproblemas identificados:

Objetivos dos gestores no esto alinhadas com a meta da empresa como ocomportamento dos custos alterada aps a transferncia para a Diviso de Produtos de Consumo.

Consumer Products Division cobrado 75 por cento do investimento da Diviso de fresagem, apesar do fato de que eles no tinham controle sobre Diviso de fresagem.

As ineficincias da Diviso de fresagem pode ser repassada para a Diviso deProdutos para o Consumidor atravs dos preos de transferncia de carga no custo real.

Para resolver estes problemas, a empresa tinha examinado abordagens diferentespreos de transferncia, mas foi difcil decidir sobre o mtodo a utilizar, devido diferentes composies dos produtos eo preo de mercado de no est prontamente disponvel e no poderia ser medido com preciso.