Topics: Corrugated fiberboard, Paperboard, Paper Pages: 4 (1030 words) Published: February 12, 2014
Case Study on Transfer Pricing:


If I were to price these boxes any lower than $480 a thousand, said James Brunner, manager of Byrch Paper Company Thompson Division, I’d be countermanding my order of last month for our salesmen to stop shaving their bids and to bid full cost quotations. I’ve been trying for weeks to improve the quality of our business, and if I turn around now and accept this job at $430 or $450 or something less than $480, I’ll be tearing down this program I’ve been working so hard to build up. The division can’t very well show a profit by putting in bids which don’t even cover a fair share of overhead costs, let alone give us a profit.

Byrch Paper Company was a medium-sized, partly integrated paper company, producing white and kraft papers and paperboard. A portion of its paperboard output was converted into corrugated boxes by the Thompson Division, which also printed and colored the outside surface of the boxes. Including Thompson, the company had four producing divisions and a timberland division, which supplied part of the company’s pulp requirements.

For several years each division had been judged independently on the basis of its profit and return on investment. Top management had been working to gain effective results from a policy of decentralizing responsibility and authority for all decisions but those relating to overall company policy. The company’s top officials believed that in the past few years the concept of decentralization had been successfully applied and that the company’s profits and competitive position had definitely improved.

Early in 2009, the Northern Division designed a special display box for one of its papers in conjunction with the Thompson division, which was equipped to make the box. Thompson’s staff for package design and development spent several months perfecting the design, production methods, and materials that were to be used; because of the unusual...
Continue Reading

Please join StudyMode to read the full document

You May Also Find These Documents Helpful

  • accounting fraud Essay
  • Management Accounting Essay
  • Essay on Accounting
  • management accounting Essay
  • Accounting Essay
  • Accounting Essay
  • Accounting Essay
  • Managerial Accounting Essay

Become a StudyMode Member

Sign Up - It's Free