=+3 The Fabrication Division manager suggests that $5.00 is now the market price for recycled sheet aluminium, and that this should be the new transfer price. Jupiter’s corporate management tends to agree. The metal recycling manager is suspicious. Metalife’s prices have always been considerably higher than $5.00 per kilogram. Why the sudden price cut? After further investigation by the Recycling Division manager, it is revealed that $5.00 per kilogram price was a one-time-only offer made to the Fabrication Division due to excess inventory at Metalife. Future orders would be priced at $5.50 per kilogram. Comment on the validity of the $5.00 per kilogram market price and the ethics of the fabrication manager. Would changing the transfer price to $5.00 matter to Jupiter Ltd?

756 Chapter 19: Management control systems, transfer pricing and multinational considerations M19_HORN3377_02_LT_C19.indd 756 2/09/13 4:05 PM