This addresses under & over investing & transfer prices.
Not what you're looking for?
E 12-13
Explain why the senior managers at Quantum have an incentive to overinvest:
Explain why senior managers at Aquafinn have incentive to underinvest:
P 12-16
Suggest a transfer price for the fabric assuming that the Fabric Division is operating at only 60% capacity due to a surge in popularity of easy care fabrics made of polyester and rayon.
Explain how your choices are related to the opportunity cost concept.
See attached for full request.
Purchase this Solution
Solution Summary
The solution provides a detailed explanation to E 12-13 and P 12-16, which include explaining why the senior managers at Quantum have an incentive to overinvest, why senior managers at Aquafinn have incentive to underinvest, and suggesting transfer prices for fabric assuming that the Fabric Division is operating at only 60% capacity due to a surge in popularity of easy care fabrics made of polyester and rayon. All additional case questions are answered in the complete solution.
Solution Preview
E 12-13
Explain why the senior managers at Quantum have an incentive to overinvest:
Management increased profits by buying into investments that yielded a low return. The senior managers increased profit but allowed ROI to decrease. Because returns were in the good (positive), there was a coordinating increase in income. Senior managers are evaluated in terms of increases of profit, giving the managers an automatic incentive to overinvest, causing them to choose projects specifically that have a rate of return that is less than the required rate.
Explain why senior managers at Aquafinn have incentive to ...
Purchase this Solution
Free BrainMass Quizzes
Production and cost theory
Understanding production and cost phenomena will permit firms to make wise decisions concerning output volume.
Basics of corporate finance
These questions will test you on your knowledge of finance.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
Operations Management
This quiz tests a student's knowledge about Operations Management