Case ID: 158001
Solution ID: 2669
Words: 1279
Price $ 75

Birch Paper Co Case Solution

Case Solution

A medium sized paper company, Birch Paper, produce white and Kraft papers and paperboard. The company had four producing division which are being judged independently on the basis of divisional profits and return on investments. One of the four divisions, Northern Division, designed a special display box and asked for bids from Thompson division and two outside companies. According to the policy of decentralizing responsibility of Birch paper, each division is allowed to buy from any supplier. Out of three bids received by Northern Division, Mr. Kenton is willing to accept the lowest bid. However, the lowest bid is in the least interest for the Birch Paper Company as a whole.

Excel Calculations

·         Thompson Division

·         Out of Pocket Cost of Thompson

·         Cost of Linerboard and corrugating medium

·         Sale price of Southern

·         Out of Pocket Cost of Southern

·         Thompson Variable Cost

·         Cost Analysis

·         Thompson          West Paper        Erie Papers Inc.

·         Company's Overall Perspective

·         Cost (External)

·         Thompson Variable Cost

·         Thompson Revenue

·         Southern Variable Cost

·         Sothern Revenue

·         Cost to Company

Questions Covered

1.       Which bid should Northern Division accept that is in the best interests of Birch Paper Company?

2.       Should Mr. Kenton accept this bid? Why or why not?

3.       Should the vice president of Birch Paper Company take any action?

4.       In the controversy described, how, if at all, is the transfer price system dysfunctional? Does this problem call for some change, or changes, in the transfer pricing policy of the overall firm? If so, what specific changes do you suggest?