C/ACC501 Accounting For Decision Making Module 3 Case TRANSFER PRICING AND RESPONSIBILITY CENTERS Assignment Overview Coffee Maker’s Incorporated (CMI) Three divisions of a CMI are involved in a dis

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C/ACC501 Accounting For Decision Making 

Module 3 Case 

TRANSFER PRICING AND RESPONSIBILITY CENTERS

Assignment Overview

Coffee Maker’s Incorporated (CMI)

Three divisions of a CMI are involved in a dispute. Division A purchases Part 101 and Division B purchases Part 201 from a third division, C. Both divisions need the parts for products that they assemble. The inter company transactions have remained constant for several years.

Recently, outside suppliers have lowered their prices, but Division C refuses to do so. In addition, all division managers are feeling the pressure to increase profit. Managers of divisions A and B would like the flexibility to purchase the parts they need from external parties at a lower cost and increase profitability.

The current pattern is that

  • Division A purchases 2,700 units of product part 101 from Division C (the supplying division) and another 1,300 units from an external supplier.
  • Division B purchases 1,100 units of Part 201 from Division C and another 700 units from an external supplier.
  • Note that both divisions A and B purchase the needed supplies from both the internal source and an external source at the same time.

The managers for divisions A and B are preparing a new proposal for consideration.

  • Division C will continue to produce Parts 101 and 201. All of its production will be sold to Divisions A and B. No other customers are likely to be found for these products in the short term, given that supply is greater than demand in the market.
  • Division A will buy 2,000 units of Part 101 from Division C at the existing transfer price; and
  • 2,000 units from an external supplier at the market price of $900 per unit.
  • Division B will buy 900 units of Part 201 from Division C at the existing transfer price; and
  • 900 units from an external supplier at $1,800 per unit.

Assignment Expectations

Each submission should include two files: (1) An Excel file and (2) a Word document. The Word document shows the memo first and short essay last. Assume a knowledgeable business audience and use required format and length. Individuals in business are busy and want information presented in an organized and concise manner.

PLEASE SEE ATTACHED FILES FOR COMPLETE ASSIGNMENT DETAILS