...Mr. Kenton should accept the lowest bid from their choice of suppliers. In this instance, Eire Paper would be the ideal choice as its price per thousand boxes is lowest at $430. Managers are graded on division profits, not company wide. The incentive scheme needs to be set up as to benefit the Thompson Division, since their profits will be lower. The bid from the Thompson division is in the best interest of Birch Paper Co. Since the Thompson division is a part of the Birch Paper Co., buying from them leads to less money coming from out of their pocket. Even though the price is technically higher, the actual cost is lower because a portion of the money stays in the company and is not part of their out of pocket costs. As a result, the company as a whole is more profitable. Lead time is also a factor to acknowledge, as Birch Paper Co would be able to purchase the products sooner, track the products easier, and receive the products in a timely fashion. If they were to outsource, this would not be the case. The VP should intervene in the situation because the company’s profitability is at stake. If the VP would not intervene then top management would accept the lowest bid, although the lowest bid does not benefit the company as a whole. While this example is less than 5% of total volume, the reason the VP needs to intervene is because it could have adverse effects in the future if similar issues arise between division profits versus company profits. By hiring the Thompson...
Words: 308 - Pages: 2
...compulsory voting is that it will increase participation in parliamentary election, thus creating a more legitimate representative democratic system. Current major democratic countries that currently employ an enforced compulsory voting system include Australia, Argentina, and Brazil. This paper will argue that voting should not be made compulsory in Canada, on the principles that there is no proof that increasing voter turnout will legitimize our representational democracy, and that we have the right to abstention. I will prove this argument by examining the political scholarship produced by Sara Birch, Justine Lacroix, and Annabelle Lever. The first academic journal I will be examining will be that of Sara Birch in her 2009 paper The Case for Compulsory Voting. In this paper, Birch is advocating that all democratic countries should implement a compulsory voting system. Birch’s primary point of reasoning behind this notion is that the electoral process has become illegitimate as a result of an unbalanced voter turnout in relation to age and class (Birch, 2009). Furthermore, she believes that by making voting a mandatory practice, it will increase “social, political, and procedural fairness.” (Birch, p.21). These three constituents form the basis for her argument. Political...
Words: 1721 - Pages: 7
...Homework – Birch Paper Company 1) Fill in the missing prices and costs on the “Diagram of the alternatives” and “Costs of the alternatives” which are attached. On the “Diagram of the alternatives”, fill in the amounts indicated in the nine dotted ovals. Some amounts may be easy to find in the case, some will need to be computed from case information, and some you will not be able to ascertain from case data; for the latter, write “don’t know”. On the “Costs of the alternatives”, complete the table using relevant amounts from the “Diagram of the alternatives”, and compute the net cost to Birch for each of the three choices. NOTE: In the case, the term “out-of-pocket costs” means variable costs. 2) On your completed “Diagram of the alternatives”, indicate which bid Mr. Kenton (Northern Division) will accept (based purely on economic considerations) by circling it and labeling it accordingly. 3) On your completed “Costs of the alternatives”, indicate which alternative is in the best interest of Birch Paper as a whole (based purely on economic considerations) by circling it and labeling it accordingly. Section: D Name: Amanda Wang Section: D Name: Amanda Wang 9) 9) 8) 8) 6) 6) 5) 5) 4) 4) 2) 2) 1) 1) 7) 7) 3) 3) 280 120 280 120 90 don’t know 90 don’t know 30 25 30 25 480 480 TP: $ (market price) TP: $ (full cost) Price: $ Price: $ Price: $ VC: $ NORTHERN (William...
Words: 466 - Pages: 2
...Birch Case--summary Background: Birch Paper Company is a large and vertically integrated paper company. It has three products: white paper, Kraft paper and paperboard. The company has four producing divisions and a timberland division (supplies pulp). Each division is operated by its manager independently, and each of them is assessed based on its profit and return on investment. A decentralizing policy has been applied by top management, which has increase corporate profits and competitive position. Situation: Thompson division designed a box for Northern division. Each box includes three parts: an inside linerboard, an outside linerboard, and the corrugating medium. Northern division paid for Thompson only the out of pocket cost of its design and development work. After that, Northern has three offers from Thompson and other two outside companies West and Erie. Usually, managers have rights to choose suppliers of materials freely, and may get sales price inside Birch. There are three bids: 1) The bid from Thompson is $480. If Thompson gets the offer, it will buy most of materials from inside Birch. These materials will cost 70% of out-of-pocket costs of $400, and is equivalent to 60% of selling price. 2) The bid from Eire Paper is $430. If Eire gets the offer, it will purchase the outside linerboard from Birch and use its own inside linerboard and corrugating medium. The outside linerboard will cost $120 a gross ($90 is the material from Southern division and $30 is...
Words: 318 - Pages: 2
...Birch Paper Company Relevant Information & Equations 1) Birch Paper Company is a producer of paper, paperboard, and corrugated boxes. The company is integrated, consisting of four separate production divisions. One of its divisions, Northern Division, asked for bids on a special corrugated box. It requested bids from one of its sister division (Thompson Division) and from two outside companies. The issue at hand is whether Northern should accept a bid from its sister division or from one of the outside companies. It should be noted that Thompsons bid is substantially higher than the bids received from the outside company. Relevant information pertaining to the three bids are provided below. 2) Thompson Division a) Bid $510 per 1000 boxes b) Thompson is marking the product up by 24.5% for a profit of $100. - $410 x 24.5% = $510 per 1000 boxes c) Thompson’s out of pocket expenses per 1000 boxes amount to $410 - 75% or $307.50 of the $410 represents the cost of linerboard and corrugating medium which will be purchased from its sister division Southern. That leaves $102.50 remaining and designated to other out of pocket costs per 1000 boxes. - $410 x 75% = $307.50; $410 - $307.50 = $102.50 out of pocket costs per 1000 boxes. d) If Thompson gets the order from Northern it will buy its linerboard and corrugating medium from the Southern Division of Birch. - Southern’s out of pocket costs for both liner and corrugating medium were about 65% of its...
Words: 712 - Pages: 3
...The Birch Paper Case This case was about the decision that Mr. William Kenton, the manager of the Northern division of the Birch Company had to make regarding the purchase of specialty boxes. Mr. Kenton had received three bids. The first was from the Thompson division of the Birch Company for the amount of $512 per thousand boxes, the second was from West Paper Company in the amount of $460 per thousand boxes, and the last was from Eire Paper Company in the amount of $442 per thousand boxes. Now the task for Mr. Kenton was to choose the offer that was in the best interest of the company. At first glance it would seem that the bid that should be accepted is the one made by Eire Paper Company because it was the lowest bid and had more room for profitability. Although the Eire Paper Company had the lowest bid if we evaluated the bid based on cost it would be as follows. The Thompson division would be $168($400 * 70%)* 60% added to $120($400 * 30%) to make it $288 of out of pocket cost, West Paper Company would be $460, and Eire Paper Company’s would be $401($442-$5-$36). The bid that would have been in the best interest of the Birch Company, if the divisions weren’t considered separate financial entities, is one from the Thompson Division. However, the Thompson division has its own goals in the company and accepting its bid would not be profitable for the Northern division. Since all the divisions of the Birch Company are judged on their own merits the Northern division and...
Words: 367 - Pages: 2
...CASE STUDY Chapter SIX CASE 6-1 Case Study on “Transfer Pricing Problems” Case SUMMARY Division A of Lambda Company manufactures product X, which is sold to Division B as a component of product Y. Product Y is sold to Division C, which uses it as a component of Product Z. Product Z is also sold to customers outside of the Company. The intracompany pricing rule is that product are transferred between divisions as standard cost plus 10 percent return on inventories and fixed assets. Case Questions Question a: with transfer price calculated in Problem 1, is Division C better advised to maintain its price at $28 or follow competition in each of the instances above? Answer: Under possible competitive price $27.00 If company maintain the price at $28, the profit=(28-23.6) ×9,000=39,600 If company follow the possible competitive price at $27, the profit= (27-23.6) ×10,000=34,000 Under possible competitive price $26.00 If company maintain the price at $28, the profit=(28-23.6) ×7,000=30,800 If company follow the possible competitive price at $26, the profit= (26-23.6) ×10,000=24,000 Under possible competitive price $25.00 If company maintain the price at $28, the profit=(28-23.6) ×5,000=22,000 If company follow the possible competitive price at $25, the profit= (25-23.6) ×10,000=14,000 Under possible competitive...
Words: 1977 - Pages: 8
...Birch Paper Company Question 1 Which bid should Northern Division on accept that is in the best interests of Birch paper company? Answer: Thompson division even through the bid from west paper seems at first to be the best choice. In you calculate out the cost you find that Thompson actually has the lowest costs associated with them. Cost involved: ✓ Costs for Thompson are a:Linearboard and corrugating medium: cost $ 400x 70% * 60% - $168 plus out of pocket: $400x 30% = 120, for a total cost of $ 288. ✓ Cost for west papers would be a total of $ 430. ✓ Cost for Eire papers would be $ 90x 60% - $ 54 (Southern) plus $ 25 (Thompson), and their supplies of $ 432 – 5 - 432 = $ 312 for a total of $ 391. Question 2 Should Mr. Kenton accept this bid? Why or why not? Answer: Mr. Kenton should not accept the bid from west because it isn’t in the best interest of the company, but at the same time with the transfer policy that exists, it is really up to him what is in the best interests of his division. I believe he should accept the bid from Thompson because not only will it result in the lowest cost, but also it will encourage buying from within the company. Question 3 Should the vice president of Birch paper company take any action? Answer: Yes. As if no orders come from top management Kenton would accept the lowest bid. The vice president of Birch should take action in order to remedy the overall problems associated with this transfer pricing...
Words: 465 - Pages: 2
...GOA INSTITUTE OF MANAGEMENT Birch Paper Company Submitted by, Chandra Mouli Kavi Section C Roll no. 2010132 1. What is the immediate economic impact to the company of sourcing the product to either WEST PAPER or EIRE? Mr. William Kenton, manager of the Northern Division, should be permitted to choose the alternative that is in Northern division's own interests. The transfer price policy gives him the right to deal with either insiders or outsiders at his discretion. If he is unable to get a satisfactory price from the inside source, which is Thompson division, he should be free to buy from outside. The three bids from Thompson division, West Paper Company and Eire Paper Company are $480, $430 and $432 respectively. Below mentioned are the costs involved while taking Thompson division, West Paper Company and Eire Paper Company into consideration. a) Costs for Thompson division Linearboard and corrugating medium : $400 x 70% x 60% = $168 Out of Pocket Total Cost : $400x30%=120 : $288 b) Costs for West Papers = $430 c) Costs for Eire Papers Outside Linear (Southern) Printing (Thompson division) Own Supplies Total Cost : $90x60%= $54 : $25 : $312 : $391 Since all the transfer prices in the company are calculated at costs, the Northern Division should accept the bid for Thompson division as it has the lowest costs. Accepting the bid based on lowest costs would also enable Birch Paper Company to earn the highest profits available. 2. What are the possible...
Words: 1004 - Pages: 5
...Birch Paper Company - ( Pg. No. 254 ) ( Transfer Pricing ) Basics: Quotes per 1000 boxes: Thompson - $480/- West Paper - $432/- Eire Papers - $430/- So prima facie Eire’s quote is the lowest Details of Thompson’s Quote: Thompson’s Outof Pocket Exp.: $400.00 (Less) Supply from Southern Div, @70%: $280.00 Hence, Cost of Thompson: $120.00 Add: 20% OH + Profit: $80.00 Total Quote $480.00 However taking Birch Paper Company as a whole, the costing will be: Supply from Southern @ cost (ie less 40%): $168.00 Thomsons own supply w/o markup: $120.00 Total cost to the co.: $288.00 So in the best interest of the co. The offer from Thomson has to be accepted. Q2. If the Transfer price however remains the same, ie $480, and as the divisions are at full liberty to choose their suppliers either from inside or outside based on the Market price, Kenton should not accept the offer of Thompson for obvious reasons as their quote is higher by $ 50.00 than the most competitive Market price. Due to decentralisation policy of the co. and each departments profits are calculated and judged individually, then it is very much acceptable that Northern div. Will not increase its purchase cost due to the hidden inefficiencies of Thomson & Southern div. Which are not capable of meeting the marker prices. Q3. Should the vice president of Birch paper Co. Take any action. Ans. Though the case suggest that the qty. Involved in the subject transaction is less than 5% of any...
Words: 534 - Pages: 3
...OBJECTIVE : To evaluate present organizational structure and management control system of Birch Paper Company particularly on the decentralized operations of its divisions with respect to its overall performance. PROBLEM : What effective management control system or systems should the Company adopt to attain maximum profitability not only of its divisions’ respective operations but that of the Company as a whole? AREAS OF CONSIDERATION 1. Company Background Birch Paper Company is a medium-sized, vertically integrated paper company, producing white and kraft papers and paperboard. It has four producing divisions and a timberland division which supplied part of the company’s pulp requirement; each division is operating independently headed by its respective division managers. Birch’s division managers normally were free to buy materials or inputs from whichever supplier they wished, and even on sales within the company; so divisions were expected to meet the going market price if they wanted the business. Early in the year, its Northern Division designed a special retail display box in conjunction with the Thompson Division, which was equipped to make the box. Thompson, as one of Birch’s four producing divisions converted paperboard output into corrugated boxes. It also printed and colored the outside surface of the boxes. Birch’s Southern Division will supply the lineboard and corrugating medium to Thompson Division in the event the latter got...
Words: 1696 - Pages: 7
...Birch Paper Case 3 General ways a decentralized firm can handle transfer pricing 1) Direct intervention by top management - If this were an extraordinarily large order or if internal transfers were rare, this would be the best solution…but this order represents less than 5% of the volume of all divisions involved. - The disadvantage of direct intervention is that top management could become swamped with pricing disputes, and individual division managers lose the flexibility and other advantages of autonomous decision making. 2) Centrally established transfer price policies - Externally based market prices are generally considered the best basis for transfer pricing when a competitive market exists for the product and market prices are readily available. - A drawback is that this method may require a change to the compensation/incentive system of Division managers Market price-based transfer pricing – A policy that sets transfer price at the market price or a small discount from the market price. From the company’s perspective, this is fine as long as the supplying unit is operating at capacity. Cost basis policy – A seller operating below capacity should transfer at the differential cost of production (variable cost). A seller operating at capacity should transfer at the market price. A seller operating below capacity is indifferent between providing the product and receiving a transfer price equal to the seller’s differential outlay cost or not providing...
Words: 678 - Pages: 3
...by seeing, or by hearing the information. Still others learn using more than one learning style. If a person was interested in finding out what their particular learning style is would be to take the VARK questionnaire for learning styles. The most common learning style is the multimodal, but the learner can switch from one type of learning style to another depending on what the subject is being learned and or their mood, Fleming (2011). After taking the VARK questionnaire, Multimodal learning styles was assessed as the learning style of choice. The multimodal learning environments allow instructional elements to be presented in more than one sensory mode (visual, aural, written, and kinesthetic), Sankey, Birch & Gardiner (2010). In this particular case visual and kinesthetic were the dominate methods of learning. Strategies of learning that this person uses are highlighting and underlining notes, grouping subjects together with a certain color highlighter, use of charts, graphs and images to help them learn the subject matter. They would also make graphs or note cards with the information placed in sequenced that they can take with them, listen to music while studying and try to make the material personal to them and others that they know. They would also break their study time up into smaller sections so that it would not seem so overwhelming. As a multimodal learner they would be very adaptable to the different...
Words: 811 - Pages: 4
...Multimodal paper suggestions for reseach paper 1. With the rapid move to more online provision of off-campus study, traditional print-based materials are being converted into more multimodal, interactive, technology-mediated e-learning formats. Multimedia enhancements in these environments include, for example, video and audio elements, recorded lecture presentations, interactive audio-enhanced diagrams and simulations, interactive quizzes and graphics. Multimedia can be used to represent the content knowledge in ways that mesh with different learning styles that may appeal to different modal preferences (Birch & Sankey, 2008; Moreno & Mayer, 2007). 2. At the same time, non-traditional learners have grown in prominence and are today a significant consideration when coming to design learning environments. This has caused a significant blurring of the boundaries in relation to how learning resources have traditionally been supplied to students, as against how they should now be supplied (Bradwell 2009). 3. “It is undoubtedly the case that a particular student will sometimes benefit from having a particular kind of course content presented in one way verses another (Pashler, McDaniel, Rohrer & Bjork, 2008. P. 116). 4. The increasing use of multimedia in teaching has provided many opportunities to present multiple representations of content (text, video, audio, images, interactive elements) to cater more effectively to the different learning styles and...
Words: 823 - Pages: 4
...IRMA 6th August 2013 To : PRM 34 & FPRM 12 From : Debiprasad Mishra Sub. : Assignment #1, MAC Please use the case “Birch Paper Co.” for a written submission of case analysis. You would like to recall that the task is not so much for you to get the correct answer for the case as for you to discuss the elements in your group, prepare a written submission, edit and refine the same. You should be able to do all these as you have ample time at your disposal for this purpose. Please follow the guidelines for a written report given in the TAU’s reading material. This is a group assignment. Every group would make one submission. The submission deadline is 5.15pm, 12th August 2013. All submissions must be made at Ms. Sarada Rajan’s office (Office Room No. 105) in the Faculty Block. • • • • The submissions should preferably be, but not necessarily, word processed. Please use A4-sized paper even if you decided to hand-write. The margins should be 1 inch on all sides. Line spacing should be 1.5 The maximum word limit for the assignment is 2500 (roughly 6 – 7 word processed pages, excluding the Executive Summary and exhibits, if any). The Executive Summary should be single spaced and limited to one page. The assignment must contain the following; 1. Executive Summary (as the first page, a summary of the entire assignment) 2. Situation analysis (or introduction), statement(s) of objective, decision problem, decision criteria, alternatives/ options, evaluation of alternatives/ options...
Words: 301 - Pages: 2
