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Using the attached document, please answer the following 4 questions. ...

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Question

Accounting

Using the attached document, please answer the following 4 questions.
1) Which bid should Mr. Kenton accept? Why? Please provide a justification for your answer
based on profitability.
2) Which bid maximizes profit for the company? Why? Please calculate the profits for all the
bids.
3) Please describe a cost-plus pricing system that would lead to the transfer taking place. Be
specific about the mark-up added to cost (i.e. cost + X%). The mark-up should be added to each
transaction, so if multiple transactions within the company are required to assemble the finished
product, then each should receive the mark-up.
4) Thinking beyond the transaction described in the case, should the corporate vice president
change the transfer pricing system? In your answer, please describe the current transfer pricing
system (1 sentence). Then list some advantages/disadvantage of the current transfer pricing
system relative to cost-plus pricing.
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