CASE 3-TRANSFER PRICING AND RESPONSIBILITY CENTERS

Coffee Maker’s Incorporated (CMI)
Three resistances of a CMI are concerned in a question. Resistance A escheatments Separate 101 and Resistance B escheatments Separate 201 from a third resistance, C. Twain resistances want the tonnage restraint manifestations that they call-together. The intercompany transactions possess remained steady restraint divers years.
Recently, beyond suppliers possess inferiored their charges, barring Resistance C refuses to do so. In observation, full resistance superintendents are sensation the influence to growth manifestation. Superintendents of resistances A and B would affect the flexibility to escheatment the tonnage they want from apparent separateies at a inferior consume and growth manifestationability.
The popular plan is that

Resistance A escheatments 2,700 parts of manifestation separate 101 from Resistance C (the furnishing resistance) and another 1,300 parts from an apparent supplier.
Resistance B escheatments 1,100 parts of Separate 201 from Resistance C and another 700 parts from an apparent supplier.
Note that twain resistances A and B escheatment the wanted supplies from twain the inside commencement and an apparent commencement at the identical season.

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The superintendents restraint resistances A and B are preparing a upstart design restraint motive.

Resistance C get live to fruit Tonnage 101 and 201. Full of its manifestationion get be sold to Resistances A and B. No other customers are affectly to be build restraint these manifestations in the abrupt engagement, given that furnish is main than require in the communicate.
Resistance A get subsidize 2,000 parts of Separate 101 from Resistance C at the tangible transport charge; and
2,000 parts from an apparent supplier at the communicate charge of $900 per part.
Resistance B get subsidize 900 parts of Separate 201 from Resistance C at the tangible transport charge; and
900 parts from an apparent supplier at $1,800 per part.

Resistance C Data Based on the Popular Undertaking
Part101201Annual tome (units)2,7001,100Transport charge/unit100Transport charge/unit$1,000$2,000Variable expenses/unit$700$1,200
The unwandering over restraint Resistance C is $1,200,000.
Case Assignment
Required:
Computations (manifestation Excel)

Set up a table homogeneous the individual underneathneath to calculate the estrangement betwixt the popular predicament and the design restraint Resistances A and B. 

Resistance APopular PredicamentProposalNo. of PartsEscheatment ChargeTotal EscheatmentsNo. of PartsEscheatment ChargeTotal EscheatmentsInside escheatments2,700$2,000$Apparent escheatments1,3002,000Total consume restraint Separate 101$$Savings to Div. A$

Calculate the operating proceeds restraint Resistance C underneathneath the popular undertaking and the designed undertaking.
Is the revised undertaking a good-natured-natured purpose? Support your counterpart with computations.

Memo (manifestation Word)
Write a 4- or 5-paragraph memo to the resistance superintendent explaining the partition executed. Start with an gate and purpose with a warning. Each of the lewd or five paragraphs should possess a designation.
Abrupt Essay (manifestation Word)
Start with an gate and purpose with a abridgment or disposal. Manifestation designations.
Evaluate and debate the implications of the subjoined transport pricing policies:

Transport charge = consume plus a mark-up restraint the selling resistance
Transport charge = honorable communicate value
Transport charge = charge negotiated by the superintendents

Why is transport pricing such a momentous manifestation twain from a financial and superintendential perspective?

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