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Birch Paper Co, Transfer Case

Hello, I am reading through my text book and am hoping for some help with three questions that correspond with a case. My instructor indicates that for my midterm, it will be very similar to this case analysis.

We are to provide the following by answering the questions. The questions do not have to be answered in order. Rather they can be answered as a whole- within a three pages maximum.

I have attached the case (2pgs) in pdf format.


? Which bid should Mr. Kenton accept?

? Which bid is in the best interests of Birch Paper Company? That is, which course of action is more profitable for the company as a whole?

? Should the commercial vice president intervene? Is so, how?

Thus far within class we have discussed various operational controls, management controls and strategic controls. How organizational tensions are managed. Effects of management controls on behavior, causes of good management controls, control problem avoidance, control alternatives,the relationship between internal controls and external strategies.

We have also discussed, allocation of costs, responsibility centers, activity based management, behavior in organizations, gamesmanship and behavioral displacement, and transfer cases.

Thank you so much for your help... .



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? Which bid should Mr. Kenton accept?
The operational control of the Thompson division has been given to James Brunner and so he decides the transfer price. In this case Mr. Kenton should accept the bid of the Thompson Division. There are several reasons for this. In this case Kenton can establish management control. He should ensure that resources are obtained and used effectively and efficiently in the accomplishment of the company's objectives. However, Thomson Division has already incurred overhead costs in developing and designing the new box. Since, this cost has been incurred by an internal division and if a lower price is paid to an outside supplier it would mean a loss to the Thomson Division. Management control lies in managers assuring that the resources are obtained and used efficiently. However, in this case Thomson Division is not charging more because of inefficiencies but is charging more because it is allocating its overhead to the cost of production. That overhead that it has actually incurred in the development and designing of the new box. It is as if the development cost of the product is being charged to the cost of the product. On the other hand the outside suppliers are already having the designed ...

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This explanation provides you a comprehensive argument relating to Birch Paper Co, Transfer Case