Case study on birch paper company with regard to transfer pricing.

AA312 Case: Birch composing go with 1. Calculating tho three options ground on be Thompson DivisionCosts Linearboard and corrugating medium 168(70%*400)*60% 30% of taboo of pocket costs 120(30%*400) Total 288 westside PapersCosts Total 430 Eire PapersCosts Outside linear(Southern div) 54(60%*90) Printing(Thompson div) 25 Own Supplies 312(432-5-36) Total 391 As shown in the calculations above, northerly should gestate the bid from Thompson piece as it has the lowest cost if alone transportation prices within the lodge were calculated at costs. Incurring the lowest costs would also enable Birch Paper Company to earn the highest engagement possible. 2. As alternatives for sourcing exists, Mr. Kenton should be permitted to choose the alternative that is in Yankee divisions own interests. The transfer price policy gives him the right to hold with either insiders or outsiders at his discretion. If he is unable to destiny a satisfactory price from the inside source which is Thompson division, he is free to buy from outside. Mr. Kenton, manager of the Northern division should non accept the bid from Thompson division. The three bids from Thompson division, West Paper Company and Eire Paper Company are $480, $430 and $432 respectively. Accepting the bid from Thompson division would be accepting the highest bid amongst all three offers (highest costs). This would prove in the lowest profits.

As the Northern division is evaluated as an investiture center, it is judged independently on the basis of its profit and show on investment. Mr. Kenton should not accept the bid from Thompson division. 3. The me! thod of utilise transfer price to decide whether to in source is optimal if the sell profit center can sell all of its products to either insiders or outsiders and if buying center can regain all of its requirements from either outside or insiders. The market price... The try out does not talk about why the transfer deposit system is dysfunctional. This is a very important part of this case. If you dissemble to get a full essay, order it on our website: OrderCustomPaper.com

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