Transfer pricing methods, goal congruence British Columbia Lumber has a Raw Lumber Division and a Finished Lumber Division The variable costs are Raw Lumber Division $100 per 100 board feet of raw lumber Finished Lumber Division $125 per 100 board feet of finished lumber Assume that there is no boa...

Transferpricing methods goal congruence 1 Alternative 1 Sell as raw lumber for 200 per 100 board feet Revenue 200 Variable costs 100 Contribution marg ...

Transfer-pricing methods, goal congruence. British Columbia Lumber has a Raw Lumber Division and a Finished Lumber Division.

Question:

Transfer-pricing methods, goal congruence. British Columbia Lumber has a Raw Lumber Division and a Finished Lumber Division. The variable costs are:

Raw Lumber Division: $100 per 100 board-feet of raw lumber
Finished Lumber Division: $125 per 100 board-feet of finished lumber

Assume that there is no board-feet loss in processing raw lumber into finished lumber. Raw lumber can be sold at $200 per 100 board-feet. Finished lumber can be sold at $275 per 100 board-feet

1. Should British Columbia Lumber process raw lumber into its finished form? Show your calculations.

2. Assume that internal transfers are made at 110% of variable cost. Will each division maximize its division operating-income contribution by adopting the action that is in the best interest of British Columbia Lumber as a whole? Explain.

3. Assume that internal transfers are made at market prices. Will each division maximize its division operating-income contribution by adopting the action that is in the best interest of British Columbia Lumber as a whole? Explain.