Transfer-pricing methods, goal congruence. British Columbia Lumber has a raw lumber division and…

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 no board feet are lost in processing raw lumber into finished lumber. Raw lumber can be sold at S200 per 100 board feet. Finished lumber can be sold at$275 per 100 board feet. Required 1. Should British Columbia Lumber process raw lumber into its finished form? Show your calculations. 2. Assume that intern al 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 interests 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 interests of British Columbia Lumber as a whole? Explain.







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