1. Lunch Inn is a small chain that operates four units in one city. Each unit purchases for its own needs and produces for its own sales on premises. Each produces its own rolls, cakes, and pies. However, when one unit underproduces, the manager is encouraged to secure the needed quantities from another unit in the chain before purchasing from the outside. One item, apple pie, costs $1.35 to produce in-house and is available outside for $2.75 from nearby bakeries. What would be an appropriate transfer price for apple pies sent from one unit to another? What effect would this transfer price have on the volume of transfers between units?

2. What are some of the possible problems implicit in allowing the chef, receiving clerk, or dining room manager to have keys to the storeroom?

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3. Explain several significant effects of improper receiving controls.

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