Kerry Pty Limited is a multinational company with headquarters in Australia and two subsidiaries in the...

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Kerry Pty Limited is a multinational company with headquarters in Australia and two subsidiaries in the South Pacific region. This company manufactures hockey sticks for which the main input is raw wood. Managers are allowed to bid separately and compete against each other for sales contracts. The wood can be obtained on the local spot market for $102 per ton, or from the parent company's mill in Sydney, Australia for $201 per ton. These are the amounts that would be shown in the subsidiaries' books. However, when raw wood is purchased from Australia, the cost shown in the parent company's records (not for manager display) is not $201 but $84. Conversion costs are $75 per ton (Fiji) and $51 per ton (New Zealand). A chart framework to examine bid possibilities for the same sales contract is presented below. The winning bid was obtained by Fiji with a bid sales price of $471 per ton of wood. Fiji based its bid by buying the raw wood at the local market. New Zealand with a bid sales price of $768 per ton of wood lost the bid. New Zealand (NZ) based its bid on buying the wood from its parent company in Australia at $201 per ton. All costs shown include freight. The company currently evaluates each subsidiary as a profit centre. Required: 1. Evaluate whose bid was in Kerry Pty Ltd's best interest by completing the chart below. (14 marks) COUNTRY REVENUE COST OF SALES: Fiji (SPOT) PER TON OF WOOD (S) SUBSIDIARIES Fiji (AUS) NZ (SPOT) NZ (AUS) CORPORATE Fiji (AUS) NZ (AUS) Kerry Pty Limited is a multinational company with headquarters in Australia and two subsidiaries in the South Pacific region. This company manufactures hockey sticks for which the main input is raw wood. Managers are allowed to bid separately and compete against each other for sales contracts. The wood can be obtained on the local spot market for $102 per ton, or from the parent company's mill in Sydney, Australia for $201 per ton. These are the amounts that would be shown in the subsidiaries' books. However, when raw wood is purchased from Australia, the cost shown in the parent company's records (not for manager display) is not $201 but $84. Conversion costs are $75 per ton (Fiji) and $51 per ton (New Zealand). A chart framework to examine bid possibilities for the same sales contract is presented below. The winning bid was obtained by Fiji with a bid sales price of $471 per ton of wood. Fiji based its bid by buying the raw wood at the local market. New Zealand with a bid sales price of $768 per ton of wood lost the bid. New Zealand (NZ) based its bid on buying the wood from its parent company in Australia at $201 per ton. All costs shown include freight. The company currently evaluates each subsidiary as a profit centre. Required: 1. Evaluate whose bid was in Kerry Pty Ltd's best interest by completing the chart below. (14 marks) COUNTRY REVENUE COST OF SALES: Fiji (SPOT) PER TON OF WOOD (S) SUBSIDIARIES Fiji (AUS) NZ (SPOT) NZ (AUS) CORPORATE Fiji (AUS) NZ (AUS)

Answer rating: 100% (QA)

SOLUTION To evaluate whose bid was in Kerry Pty Ltds best interest we need to compare the revenue an... View the full answer