Costs and Transfer Price
Assignment: Analyze the Case and answer the following questions:
Case Background
ZUMWALD AG produced and sold a range of medical diagnostic imaging systems and biomedical test equipment and instrumentation. Below were some data about the company * Consisted of 6 operating divisions
3 of them were: * Imaging System Division (ISD) sold ultrasound and magnetic imaging system * Heidelberg Division (Heidelberg) sold high resolution monitors, graphics controllers and display subsystems 50% served ISD, 50% outside customer * Electronic Component Division (ECD) sold application specific integrated circuits and subassemblies. It was established as a captive supplier to other Zumwald divisions but now served outsider also
* Total revenue € 3 billion * Highly decentralized basis management * Division performance indicators were achievement of budgeted target Return on Invested Capital (ROIC) and sales growth * Partially vertical integrated * Each division allowed to outsource the component
Imaging System Division (ISD) is going to launch new product namely X73
The characteristic of X73 was as follow:
* It was a new ultrasound Imaging system * The product was faster, cheaper and more compact * Design was supported by Heidelberd division’s engineers at full cost of time compensation.
To get a best price for its component, ISD did a bidding which involved Heidelberg. Unfortunately Heidelberg bidding price was much higher than outsider company, therefore ISD decided to buy from Display Technology Plc
Here is the bidding:
Supplier | Cost per X73 System (€) | Heidelberg Division | 140,000 | Bogardus NV | 120,000 | Display Technologies Plc | 100,500 |
The decision triggered a dispute since Heidleberg felt that ISD did not show a team work in this case.
1. What sourcing decision for the X73 materials is in the best interest of
a. The Imaging Systems Division?
Base on the
Case Background
ZUMWALD AG produced and sold a range of medical diagnostic imaging systems and biomedical test equipment and instrumentation. Below were some data about the company * Consisted of 6 operating divisions
3 of them were: * Imaging System Division (ISD) sold ultrasound and magnetic imaging system * Heidelberg Division (Heidelberg) sold high resolution monitors, graphics controllers and display subsystems 50% served ISD, 50% outside customer * Electronic Component Division (ECD) sold application specific integrated circuits and subassemblies. It was established as a captive supplier to other Zumwald divisions but now served outsider also
* Total revenue € 3 billion * Highly decentralized basis management * Division performance indicators were achievement of budgeted target Return on Invested Capital (ROIC) and sales growth * Partially vertical integrated * Each division allowed to outsource the component
Imaging System Division (ISD) is going to launch new product namely X73
The characteristic of X73 was as follow:
* It was a new ultrasound Imaging system * The product was faster, cheaper and more compact * Design was supported by Heidelberd division’s engineers at full cost of time compensation.
To get a best price for its component, ISD did a bidding which involved Heidelberg. Unfortunately Heidelberg bidding price was much higher than outsider company, therefore ISD decided to buy from Display Technology Plc
Here is the bidding:
Supplier | Cost per X73 System (€) | Heidelberg Division | 140,000 | Bogardus NV | 120,000 | Display Technologies Plc | 100,500 |
The decision triggered a dispute since Heidleberg felt that ISD did not show a team work in this case.
1. What sourcing decision for the X73 materials is in the best interest of
a. The Imaging Systems Division?
Base on the