AIP 6.9 Transfer Prices and Changing from a Cost to a Profit Center LO 2, 5 Northern Blue Company has manufacturing plants and retail shops. The retail shops purchase products from the manufacturing plants. Currently, the manufacturing plants are operated as cost centers and only supply the company’s retail shops. The transfer price is cost-based and the retail shops operate as profit centers. The company president is considering an increase in manufacturing capacity that will allow sales to customers outside the organization. The president plans to make the manufacturing plants profit centers. Questions a. Why are the managers of the retail shops unhappy with these new plans?
AIP 6.9 Transfer Prices and Changing from a Cost to a Profit Center LO 2, 5 Northern Blue Company has manufacturing plants and retail shops. The retail shops purchase products from the manufacturing plants. Currently, the manufacturing plants are operated as cost centers and only supply the company’s retail shops. The transfer price is cost-based and the retail shops operate as profit centers. The company president is considering an increase in manufacturing capacity that will allow sales to customers outside the organization. The president plans to make the manufacturing plants profit centers. Questions a. Why are the managers of the retail shops unhappy with these new plans?
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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AIP 6.9 Transfer Prices and Changing from a Cost to a Profit Center LO 2, 5
Northern Blue Company has manufacturing plants and retail shops. The retail shops purchase products from the manufacturing plants. Currently, the manufacturing plants are operated as cost centers and only supply the company’s retail shops. The transfer price is cost-based and the retail shops operate as profit centers. The company president
is considering an increase in manufacturing capacity that will allow sales to customers outside the organization. The president plans to make the manufacturing plants profit centers.
Questions
a. Why are the managers of the retail shops unhappy with these new plans?
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