Case 6-2: Birch Paper Company 1. Which bid should Northern Division accept that is in the best interests of Birch Paper Company? Northern Division should accept the bid of the Thompson division even though 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. Costs for Thompson are as follows: Linearboard and corrugating medium: Cost $400x70%= $168 plus Out of Pocket: $400x30%=120
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President Birch Paper Company Although the current financial implications for Birch Paper Company are not substantial‚ as the contract in question is less than 5% of the volume in any division‚ it is imperative that Birch Company establishes and addresses its transfer price policies and procedures with each division. This will ensure that the divisions are not putting their objectives ahead of the Company’s and as a result‚ not maximizing the overall revenues and profits of Birch Paper Company. This
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Case 6-2 Birch Paper Company 1 Case 6-2 Birch Paper Company "If I were to price these boxes any lower than $480 a thousand‚" said James Brunner‚ manager of Birch Paper Company’sThompsonDivision‚ "I’d becountermanding my order of last month for our salesmento stop shaving their bids and to bid full-cost quotations. I’ve been trying for weeksto improve the quality of our business‚and if I turn around now and acceptthis job at $430or $450 or somethingless than $480‚I’ll be tearing down this
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Birch Paper Company Individual Case Strategy & Key Success Factors: Birch Paper (BP) company is structured in such a way that it is decentralized‚ and each division acts as a profit centre. Furthermore‚ it uses vertical integration with examples such as Timberland division supplying pulp‚ and the Thompson Division (TD) providing printing and colouring. This strategy‚ which composes of decentralization along with the design of profit centres indicates a profit
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Group Case Analysis Project: “Birch Paper Company” ------------------------------------------------- Question1 Mr. Kenton should accept Bid #2 – West Paper Company at $430 as it was the lowest bid and thus will give Northern Division the highest return. Under the current company policy each division is judged independently based on profit and return‚ thus Mr. Kenton would only be interested in his own division’s success and not the overall success of the company. -------------------------------------------------
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CMA 302 – Tutorial Case Study: Final Draft Birch Paper Company 1. Background Birch Paper Company is a medium sized partly integrated company that produces Kraft papers and paperboard. There are four producing divisions and one timberland division which supplies part of the company’s pulp requirements. The divisions are - Northern Division - Southern Division - Thompson Division - Division 4 - Timberland Each
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Birch Paper 1 How would you resolve the transfer pricing conflict? Present calculations to support your arguments. The three bids (per thousand boxes) are as follows: Thompson division: $480 West Paper Company: $430 Eire Papers: $432 West Paper Company is the cheapest of the three although it is an outsider (as is Eire Papers). The manager of the Northern Division‚ William Kenton‚ should be allowed to buy from outside if the quoted price from the inside source is 10% over the
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AA312 Case: Birch Paper Company 1. Calculating all three options based on costs Thompson DivisionCosts Linearboard and corrugating medium 168(70%*400)*60% 30% of out of pocket costs 120(30%*400) Total 288 West PapersCosts Total 430 Eire PapersCosts Outside linear(Southern div) 54(60%*90) Printing(Thompson div) 25 Own Supplies 312(432-5-36) Total 391 As shown in the calculations above‚ Northern should accept the bid from Thompson division as it has the lowest cost if all transfer prices
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SRFHR1013010; SRFHR1013014; SRFHR1013023 Contents Birch Paper Company 1 Background: 1 Problem Statement 2 Problem Analysis 3 Recommendations 6 Birch Paper Company Background: Birch Paper Company was a medium sized vertically integrated Paper Company that manufactures three products that were white and Kraft papers and paperboard. This company had four departments that produced the output and a Timberland department that delivers part of the pulp the company needed. BCP used a decentralization strategy
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Case 6-2 Birch Paper Company Internal Environment • Medium sized‚ partly integrated paper company • Portion of paperboard output was converted into corrugated boxes by the Thompson Division • Four producing divisions and a timberland division to supply part of company’s pulp requirements • Divisions judge independently on basis of profits and return on investments • Decentralization successful‚ company’s profits and competitive position improved External Environment Customer/Supplier
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