Solutions 1

Topics: Forward contract, Management, Control theory Pages: 5 (1970 words) Published: April 1, 2015
6-4 Medoc Company

Advice given to the author of the constraints in the organizational structure of the Medoc Company : * There should be limits - limits on authority division clearer and transparent primarily related to transfer pricing policies of both the milling division and consumer products division . * Considering the proposal of the Medoc Company 's top management regarding the calculation of the transfer pricing policy between milling division and consumer products division that the division of the budget and the return of 10 % change -ubah because there is no proper way of comparison in the products sold by the division of consumer products , it is still relevant that the organizational structure of the company 's two divisions still unclear authority so hard to establish nominal species selection payback percentage between the two divisions .

If there is no limit according to the authors , the organizational structure will in turn make the condition less and less and less favorable , given the previous condition that the transfer pricing policy made ​​many complaints by consumer product division , such as the cost of production inefficiencies that should be the responsibility of the milling division instead become a burden products division consumers , are also subject to deduction of 75% investment by milling division when this division does not include additional new equipment , inventory levels , and others - others . Another impact because there is no limitation will affect the performance of the two divisions in the company because there is still inequality and complaints - complaints that occur mainly the issue of cost - the cost of the underlying transfer pricing between divisions .

7.4 Aloha Products

1. Overview of Aloha Products:
Aloha Products is a United States-based coffee-processor company that has been providing non-specialty and low-priced coffee for over a hundred years. It purchases the raw materials or what buyers and sellers refer to as “green coffee” from brokers and trade firms then processes the coffee and sells the final product to customers. Large companies such as Nestle and P&G directly import the unprocessed or green coffee beans from coffee plantations in tropical countries such as Brazil and Colombia while companies with smaller levels of business such as such as Aloha buy the green coffee beans from brokers or trade firms. Aloha Products is managed by the owners and its headquarters is located in Ohio, United States. It has three plants located in Midwestern United States, each plant being responsible for its own profit and loss. Each plants performance is measured by each plant managers gross margin generated per plant. The raw materials or green coffee beans are handled by the company’s purchasing unit that is located in New York City. Each plant receives a production schedule that is determined from the center and receives raw materials as well as pay in accordance with the production requirements of each plant. Aloha’s Top management is regulated by the members of the founding family. Company uses centralized control system where all main decisions regarding purchases, production, sales, marketing and promotion are made on corporate level while plant managers are only responsible for their profit and loss. Also there is centralized preparation of overall financial statement at home offices. This organization has led plant managers to a lack of adequate control over the activities of the managed plant; however, they are still assessed on the performance. This method has been done until in the 1990s, when the plant managers started to speak out on their dissatisfaction on the computation of their bonuses since they do not have authority to determine the prices of raw materials, production schedules and output prices from the manufacturer. External factors such as the steady decline in Americans consumption of coffee from 1965 to 1990 affected the sales and profits of...
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