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Maple Case

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Submitted By siyi
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Case Analysis: Maple

Business Performance Management – HEC 2014-15

1

Situation
Background to Maple
• World leader for the production of smartphones
• Division A: manufactures the smartphones’ processors
• Division B: assembles the various components (digital screen, processor, frame, etc.)
• Both divisions are profit centers
• The transfer price for the processor: long-run average market price Business Performance Management – HEC 2014-15

2

Situation
We are given the following information for the divisions:
Estimated selling price for final product (smartphone)
Long-run average selling price for intermediate product (processor)
Incremental costs in Division A (manufacturing cost)
Incremental costs for completion in Division B (assembly cost)

€300
€200
€120
€150

Recent Developments

The manager of Division B made the following calculations:
Selling price for final product
Transferred-in costs (market)
IncrementaI costs for completion
Contribution (loss) on product

Business Performance Management – HEC 2014-15

€300
€200
€150
(€50)

3

Question 1:
Should transfers be made to Division B if there is no excess capacity in Division A? Is the market price the correct transfer price? Incremental (outlay) cost approach shows positive contribution for the company

Selling price
TP for B
Incremental costs contribution (loss)

A (manufactures) B (assembles)
200
300
200
120
150
80
(50)

Business Performance Management – HEC 2014-15

MAPLE
300
270
30

4

Question 1
However, there is no excess capacity for Division A. Selling to
Division B would divert processers from the market.
Selling the processor in the market results in greater contribution for the company as a whole:
Selling of intermediate product
Incremental cost in Division A
Contribution (loss)

€200
120
€80

Thus:

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