1. For each of the three alternatives, diagram the potential cost flows, per thousand boxes, among all of the parties in the case: Southern Division, Thompson Division, Northern Division, Erie Papers Ltd, and West Paper Company.
The cost flow per thousand boxes between southern to Thompson is 280 and from Thompson to Northern division is 470.
Similarly the boxes between west paper and Northern division were 430.
West Paper Company
For Eire Papers the boxes were 30 for Thompson and 80 for southern and 430 for northern division.
2. Which bid should be accepted? Justify your answer.
Northern division variable cost (West paper)
Td variable cost(Thompson)
Southern Division variable cost(Thompson)
Northern division variable cost(Eire)
Southern division total profit(Eire)
TD total profit(Eire)
James Burnner thinks that after the transfer private of the operational control , Kenton should accept the big . Above table clearly shows that northern should accept the bid which is of the lowest cost that will make Birch Company earn higher profit margin. Thomson division is also charging more not because of the inefficiencies but because of the overhead cost .
3. Which alternative is in the best interests of Birch Paper Company as a whole? Provide the appropriate analyses to support your answer.
Birch paper should go with Thompson division as it has heighst profit margin and lowest cost.
4. Discuss the alternatives from the perspective of the managers of the Southern, Thompson, and Northern divisions. Which alternative is best for each division? Do you think a compromise can be reached across the three divisions? Explain whether or not you think each division would be willing to accept a compromise.
As strategic control management should support its division. Organization should understand where its boundaries are. As per porter’s model these forces are supplier power and from the birch perspective they should select their company over the others. But from cost perceptive it would cost 430 to purchase from outside and Thompson division will gain only $5.
5. Should the commercial vice president intervene? If so, how? If not, why not?
There are both