Question: In August 2002, a pricing dispute arose between the managers of some of the divisions of Zumwald AG. Mr. Rolf Fettinger, the company's managing director,

In August 2002, a pricing dispute arose between the managers of some of the divisions of Zumwald AG. Mr. Rolf Fettinger, the company's managing director, had to decide whether to intervene in the dispute.
Questions
1. What sourcing decision for the X73 materials is in the best interest of:
a. The Imaging Systems Division?
b. The Heidelberg Division?
c. The Electronic Components Division?
d. Zumwald AG?
2. What should Mr. Fettinger do regarding the X73 sourcing issue?
3. Can a system be designed to motivate each of Zumwald's division managing directors to take actions that are not only in the interest of their division but also in the best interest of Zumwald? Explain.

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Purpose of Case This case describes a transfer pricing issue that is common in decentralized divisionalized firms The case raises issues about internal pricing and more generally the operation of a de... View full answer

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