MANAGERIAL ACCOUNTING

Performance Management

Chapter 19: Transfer Pricing Assisi Electronics Assisi Electronics manufactures motherboards for computers. The company is divided into two divisions: manufacturing and programming. The manufacturing division makes the board, and the programming division makes the adjustments required to meet the customer’s specifications The average total cost per unit of the boards in the manufacturing division is about $450 and the average total cost per board incurred in the programming division is $100. The average selling price of the boards is $700. The company is now operating at capacity, and increasing the volume of production is not a feasible alternative. In the past, the managers of the two divisions have negotiated a transfer price.

The average transfer price has been about $500, resulting in the manufacturing division recognizing a profit of about $100 per board. Each of the managers receives a bonus that is proportional to the profit reported by his/her division. Karen Barton, the manager of the manufacturing division, has announced that she is no longer willing to supply boards to the programming division. Sam Draper, the senior purchasing executive for Perugia Electronics, a computer manufacturer, has indicated that he is willing to purchase, at $650 per unit, all the boards that Karen’s division can supply and is willing to sign a long-term contract to that effect. Karen indicated that she offered the boards to the programming division at $625 per board on the grounds that selling and distribution costs would be reduced by selling inside. Neil Wilson, the manager of the programming division, refused the offer on the grounds that the programming division would show a loss at the transfer price.

Neil has appealed to Shannon McDonald, the general manager, arguing that Karen should be prohibited from selling outside. Neil has indicated that a preliminary investigation suggests that he cannot purchase these boards for less than $640 outside. Therefore, allowing Karen to sell outside would effectively doom Neil’s division.

1. What transfer price would you recommend and why?

2. What recommendations do you have for the programming division?

3. What are some of the strategic issues that Assisi Electronics needs to consider?

Case Name Module

Identify the strategic issues surrounding the problem This is the section where you clearly state the problem or issue under review. This statement of problem or issue will direct your problem solving. The problem statement doesn’t need to be excessively long. Identify the alternative actions This is where you determine the alternatives for the problem you have identified (in step 1) will be solved. For Dolci there are two methods of identifying profit-center profitability. It may be a good idea to state that two analyses will be performed to study the cost allocation and profitability of each product line.

Obtain information and conduct analyses of the alternatives For each case, this is where you will SHOW the computations or utilization of the decision tool. Questions at the end of the case are provided to give you a clear direction of the content required in this area. These analyses performed here will provide the direction for the next section. The analysis can be attached as an exhibit, much like the exhibits in Dolci. Based upon strategy and analysis, choose and implement the desired alternative Now that you have done the number crunching in Step 3, articulate the desired alternative and why. Make sure that your “solution” in this step solves the problem that you have identified in the first step. Often, students come up with a solution, but it does not solve the problem that was identified. Well, then something has to give here…. either the problem statement needs to be re-written or the recommendation based on analysis is off.

This is where the problem and its solution should clearly support the strategy of the company. This case write-up is something that would be used by the executive management in determining strategic direction for the entity. Therefore, it is NOT enough to state that one analysis is better than the other. What you need to do is recommend the ACTIONS that should result from the analysis. Provide an ongoing evaluation of the effectiveness of the implementation Since a time-series analysis is a longer-term time frame, our course does not provide that data. You may wish to comment about continued review of the implementation decision.

Assignment Overview

Type:  Individual Project

Unit:  Summarize and Present Information in a Meaningful Way

Due Date:  Wed,7/22/20

Grading Type:  Numeric

Points Possible:  100

Points Earned: Earned not available

Deliverable Length:  5-6 slides and speaker notes (75 word minimum per slide)

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Assignment Details

Assignment Description

For this assignment, you will need to become familiar with specialized business intelligence (BI) software, and then download the software. Complete the following steps to begin:

• Step 1: Watch an instructional video on the BI software.
• Step 2: Review various BI Software options, including Tableau and Excel. Search the Library and the Internet to learn about optional software.
• Step 3: If you choose Tableau, download the Tableau BI software. After you select the link, look for the orange icon in the middle portion of your screen to begin the download or use any BI software to create a graph illustrating comparison between the United States and zip code data.

Consider the following scenario, continued from Unit 1 Individual Project:

Big D Incorporated needs to prepare an assessment regarding the feasibility of making a recommendation for expansion into another market. As the business analyst, your assignment is to prepare a short presentation for the Board of Directors that apply concepts learned in Unit 1 and concepts from Unit 2 to make the necessary recommendations and justifications for those recommendations. You will need to compare and contrast the varying markets to make the best recommendation possible. Complete the following:

• Download the reports for the United States from this Web site. The Web site provides free demographical services where one can choose from a variety of criteria and generate reports based on the U.S. Census data. This particular file contains 4 reports:
  • General Summary
  • Census Trend 1980 to 2000 Summary
  • Occupation and Employment Summary
  • Income Summary (based on the entire United States)
• Download the reports for zip code 60614 from this Web site. This particular file contains 4 reports:
  • General Summary
  • Census Trend 1980 to 2000 Summary
  • Occupation and Employment Summary
  • Income Summary based on the U.S. zip code 60614
• Using all 4 demographic reports (General Summary, Census Trend 1980 to 2000 Summary, Occupation and Employment Summary, and Income Summary) for the United States and zip code 60614, prepare a 1-page summary slide explaining how your territory differs from the national profile. Feel free to note anything that you found surprising in the data.
• Use the BI software you choose to depict information from these reports.
• Prepare a presentation of 4–5 slides of your major findings. You may group a category of data from the Total United States and zip code 60614, and create a graph to show how they differ. The presentation should have at least 2 graphs and a headline that summarizes a key takeaway from the graph.

Your presentation should include 5–6 slides in PowerPoint, plus title and reference slides with speaker notes (75-word minimum per slide).

For assistance with the usage of Tableau for analysis and reporting, review and use the instructions below. Those should be helpful if you are having problems with the software usage or data. However, you do not need to use Tableau. For BI software usage such as Excel, resort to using the Help functions and other resources on the Internet and in videos to learn how to use Excel to create graphical presentations including table usage.

The instructions to create a bar graph in Tableau (optional) or in another BI software are as follows.

1. Open the assignment instructions.
2. Download the BI software.
3. Create your Tableau Public Account.
4. Click the download link for the 60614 files (file will open in Excel).
5. Click the download link for the U.S. file (file will open in Excel).
6. The following are some options:
   1. Create separate demographical worksheets (e.g., Educational Attainment or Household Income). Include zip code and U.S. data.
      • See a sample of the file available with column headings and extraneous blanks.

• See a sample of the file available with column headings and extraneous blanks.

7. Create a file with data organized without extraneous rows and columns but including headings.
8. The idea is to clean up the file before usage. Separating files and worksheets may be the best way to make this happen
9. Note that in the real situation, when using BI software, you will want to ensure that your data are clean and that you have similar data in your files.
10. Save the file(s) on your computer.
11. Open Tableau. Then do a File > Open > Open on your saved file.
12. At the bottom of the screen on the left, click on the little box next to Sheet 1 (looks like a bar graph with a plus in the top left corner).
13. Under “Measures” (on the left), you should see “Chicago” and “U.S.” Click on “U.S.,” and pull it into rows at the top of the screen. Then, click on Chicago and pull it over into rows.
14. Under “Dimensions” on the left, you should see “Household Income.” Click on “Household Income,” and pull it into column.
15. In the second column from the left, you should see “Measures.”
16. In the top right corner, you should see a “show me” box illustrating ways you can view the data based on the values you have chosen. To do side-by-side comparisons, put your cursor over the rightmost picture on the third line with the side-by-side blue and orange bars. Click on it. Your graph should appear on the page. You can play around with how you want to portray your data.
17. To save in Tableau Public, click File > Save to Tableau Public as… > give the file a descriptive name. You will be asked to log into Tableau Public using your e-mail and password.
18. When your graph is saved in public, at the bottom right, there is a download button. Decide how you will save the file. (You can create an image and name the .png file. It will be saved in Tableau Public.)
19. After the file is saved, open the .png file, and edit or copy the graph.
20. Open your PowerPoint file, and then paste (special) it on the slide. You can adjust the size.
21. Repeat the same in Tableau opening of any other prepped and cleaned file.

Note: Measure values are your number fields; measure names are the descriptors.

For more information on creating PowerPoint Presentations, please visit the Microsoft Office Applications Lab.

Additional Resources to Use

American Marketing Association. (n.d.). Summary reports. Retrieved from http:/www.marketingpower.com/content753.php

Igines. (2012, December 9). How to make a line graph in Excel (Scientific data) [Video file]. Retrieved from https://www.youtube.com/watch?v=Xn7Sd5Uu42A

Microsoft. (2018). Create a chart from start to finish. Retrieved from https://support.office.com/en-us/article/Create-a-chart-from-start-to-finish-0baf399e-dd61-4e18-8a73-b3fd5d5680c2

References

Pak, A. (2013, August 12). Tableau public - Overview and applications [Video file]. Retrieved from http://youtu.be/PnkMiHocqRw

Tableau. (2018). Tableau public. Retrieved from http://www.tableausoftware.com/public/