Chapter 9, Problem 5EB

Assume you are the warehouse manager for Vinnie’s Vinyls, a multi-location business specializing in vinyl records. Vinnies’s operates under a cost-based transfer structure and the warehouse supplies all stores with the records. The stores can purchase records only from the warehouse, and the warehouse can only sell to Vinnie’s stores. The manager of the West store has some concerns relating to the store’s financial performance and has asked for your help analyzing transfer costs. After calculating the operating income in dollars and the operating income percent, analyze the following financial information to determine costs that may need further investigation. (Hint: it may be helpful to perform a vertical analysis.)