logging in or signing up Birch Paper Company aSGuest97270 Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINT lite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 162 Category: Entertainment License: All Rights Reserved Like it (0) Dislike it (0) Added: May 06, 2011 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... Premium member Presentation Transcript Birch Paper Company: Birch Paper Company Issues in Transfer PricingBirch Company: Birch Company Is a partly integrated company with four producing divisions and a timberland division. Three division in the focus: Northern Division Thompson Division Southern Division Divisions operate as profit centres/Investment Centres Each divisional manager was normally free to buy from inside or outside.Northern Division’s Problem: Northern Division’s Problem Received three bids as follows: TD: 480 WPC: 430 EPL: 432 Which one to be accepted? Why TD division is not quoting 430.Slide 4: Northern Division Northern Division Northern Division West Paper 430 Thompson Southern 480 280 Eire Papers Southern Thompson 432 30 90Division Vs Company: Division Vs Company Find the relevant cost for the company in all the three situations. Find the contribution for the company in all the three situations.Slide 6: Relevant Cost for the CompanyRetain the Order: Retain the Order Since corporate cost is lower Birch Paper should retain the order. However, Should TD sell at 480 or 430?Thompson’s loss Vs. Birch’s Los: Thompson’s loss Vs. Birch’s Los If Thompson rejects the price of 430, its loss is the opportunity cost: Rs. 30 (430 –400) If Thompson rejects the lowest price. B. Company’s loss: 142 ? (430 – 288) Loss for the company is much higher than the loss for the divisionTransfer Price of Thompson: Transfer Price of Thompson Is price of TD high due to the inefficiencies of SD? Can SD reduce its price? Will SD reduce its priceThompson’s Options: Thompson’s Options Thompson’s manager is not recognising the profits made by Southern. Capacity operation (430 – 400) Expecting new order from the market (risk) Respecting the new pricing policy Accepting the order at 430 may affect overall profit.Alternatives: Alternatives 430 for the boxes and 280 for the paper Divide the savings: 142 equally between TD and SD Let TD sell at 480 and ND buy at 430 and make necessary accounting adjustment Let them negotiate You do not have the permission to view this presentation. In order to view it, please contact the author of the presentation.
Birch Paper Company aSGuest97270 Download Post to : URL : Related Presentations : Share Add to Flag Embed Email Send to Blogs and Networks Add to Channel Uploaded from authorPOINT lite Insert YouTube videos in PowerPont slides with aS Desktop Copy embed code: (To copy code, click on the text box) Embed: URL: Thumbnail: WordPress Embed Customize Embed The presentation is successfully added In Your Favorites. Views: 162 Category: Entertainment License: All Rights Reserved Like it (0) Dislike it (0) Added: May 06, 2011 This Presentation is Public Favorites: 0 Presentation Description No description available. Comments Posting comment... Premium member Presentation Transcript Birch Paper Company: Birch Paper Company Issues in Transfer PricingBirch Company: Birch Company Is a partly integrated company with four producing divisions and a timberland division. Three division in the focus: Northern Division Thompson Division Southern Division Divisions operate as profit centres/Investment Centres Each divisional manager was normally free to buy from inside or outside.Northern Division’s Problem: Northern Division’s Problem Received three bids as follows: TD: 480 WPC: 430 EPL: 432 Which one to be accepted? Why TD division is not quoting 430.Slide 4: Northern Division Northern Division Northern Division West Paper 430 Thompson Southern 480 280 Eire Papers Southern Thompson 432 30 90Division Vs Company: Division Vs Company Find the relevant cost for the company in all the three situations. Find the contribution for the company in all the three situations.Slide 6: Relevant Cost for the CompanyRetain the Order: Retain the Order Since corporate cost is lower Birch Paper should retain the order. However, Should TD sell at 480 or 430?Thompson’s loss Vs. Birch’s Los: Thompson’s loss Vs. Birch’s Los If Thompson rejects the price of 430, its loss is the opportunity cost: Rs. 30 (430 –400) If Thompson rejects the lowest price. B. Company’s loss: 142 ? (430 – 288) Loss for the company is much higher than the loss for the divisionTransfer Price of Thompson: Transfer Price of Thompson Is price of TD high due to the inefficiencies of SD? Can SD reduce its price? Will SD reduce its priceThompson’s Options: Thompson’s Options Thompson’s manager is not recognising the profits made by Southern. Capacity operation (430 – 400) Expecting new order from the market (risk) Respecting the new pricing policy Accepting the order at 430 may affect overall profit.Alternatives: Alternatives 430 for the boxes and 280 for the paper Divide the savings: 142 equally between TD and SD Let TD sell at 480 and ND buy at 430 and make necessary accounting adjustment Let them negotiate