North Country Auto

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Written by:

Dorothy M


Date added:

July 30, 2014








No of pages / words:

7 / 1931


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It was important that as one department aims to maximize profit, it does not negatively affect other departments. Issues that needed to be resolved include setting of transfer prices between departments, formalizing intercompany transactions, the divisional structure (use of profit or cost center), and the proper allocation of company profits among departments...
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After doing the analysis, it was decided that transfer price should be set at market price for New to Used Car department and Service to other departments, where as full cost plus mark-up to be used from Parts and Body Shop to other departments. Furthermore, it was determined that a better structure for the company would be for the New, Used, and Service departments to remain as profit centers, while the Parts and Body Shop department be changed to cost centers because the division managers did not have direct or influential control on the division's profit...
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