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28 - 22-30(25 min Goal congruence problems with cost-plus...

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22-30 (25 min.) Goal congruence problems with cost-plus transfer- pricing methods, dual pricing system (continuation of 22-29). Two examples of goal congruence problems are: a. Processing Division manager using an outside supplier when Oceanic Products operating income is maximized by buying from Harvesting Division. b. Harvesting Division manager selling to an outside purchaser when it is better for Oceanic Products to process internally. 2. Transfer into buying division at market price Harvesting Division to Processing Division = $1.00 per pound of raw tuna Transfer out to selling division at 150% of full costs Harvesting Division to Processing Division = 1.5 × ($0.20 + $0.40) = $0.90 per pound of raw tuna Tuna Harvesting Division Division revenues, $0.90 × 1,000 $ 900 Division variable costs, $0.20 × 1,000 200 Division fixed costs, $0.40 × 1,000
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