Birch Paper Co Case Solution

Case Solution

Comprises  of transfer pricing among three departments of a company.

Excel Calculations

·         Thompson Division

·         Out of Pocket Cost of Thompson

·         Cost of Linerboard and corrugating medium

·         Sale price of Southern

·         Out of Pocket Cost of Southern

·         Thompson Variable Cost

·         Cost Analysis

·         Thompson          West Paper        Erie Papers Inc.

·         Company's Overall Perspective

·         Cost (External)

·         Thompson Variable Cost

·         Thompson Revenue

·         Southern Variable Cost

·         Sothern Revenue

·         Cost to Company

Questions Covered

1.       Which bid should Northern Division accept that is in the best interests of Birch Paper Company?

2.       Should Mr. Kenton accept this bid? Why or why not?

3.       Should the vice president of Birch Paper Company take any action?

4.       In the controversy described, how, if at all, is the transfer price system dysfunctional? Does this problem call for some change, or changes, in the transfer pricing policy of the overall firm? If so, what specific changes do you suggest?