1.Discuss the approaches by Parks and Ravenport, respectively. Evaluate the decisions that these approaches would lead to in regard to accepting or rejecting the Western Digital order. Show your calculations 2.If you were the responsible manager at the ASIC Division, would you accept Western's offer? How would this affect the bottom line of the ASIC Division given the transfer pricing system in place? Show your calculations. 3.Put yourself in the shoes of Joe Tisch, Chiefe Controller for Sub-Micron. What would you do in this situation?

reading material?https://www.gsb.stanford.edu/faculty-research/case-studies/sub-micron-devices-inc

Sub-Micron Devices Case -- Exhibits Exhibit 1 Supplementary budgeted data for 1996 (March 31, 1996) Number of chips sold internally to Systems Division 7,000,000 Number of chips sold externally 3,000,000 Number of regular moves in Wafer Fab 1,500,000 Number of photolithographic moves in Wafer Fab 2,350,000 Exhibit 2 Pro forma profit and loss statement for 1996 (March 31, 1996) Revenues Internal sales to Systems Division 333,495,000 External sales 135,000,000 Cost of goods sold Internal sales 303,177,000 External sales 107,373,000 S&A (allocated entirely to external sales) Budgeted Prot Internal sales 30,318,000 External sales 3,827,000 $468,495,000 $410,550,000 $23,800,000 $34,145,000 :XIernaI sales Exhibit 3 Manufacturing cost budget for 1996 (March 31, 1996) Wafer Fab: Direct labor costs Direct materials Variable overhead Depreciation Other fixed overhead Total manufacturing cost in Wafer Fab: Assembly: Direct labor costs Direct materials Variable overhead Depreciation Other fixed overhead Total manufacturing cost in Assembly: I=vlnnivl A J,UZI,UUU $17,000,000 35,700,000 37,400,000 71,400,000 47,600,000 $25,500,000 17,850,000 45,900,000 68,850,000 43,350,000 $209,100,000 $201 ,450,000 IUIaI manuracrurlng C051: \"1 HSSBmDIyI Exhibit 4 Manufacturing cost budget for 1996 (including Western's order) Wafer Fab: Direct labor costs $22,525,000 Direct materials 50,410,000 Variable overhead 52,394,000 Depreciation 71,400,000 Other fixed overhead 47,600,000 Total manufacturing cost in Wafer Fab: Assembly: Direct labor costs 33,788,000 Direct materials 29,205,000 Variable overhead 68,391,000 Depreciation 68,850,000 Other fixed overhead 43,350,000 Total manufacturing cost in Assembly: Exhibit 5 Supplementary budgeted data for 1996 (including Western's order) Number of chips sold internally to Systems Division 7,000,000 Number of chips sold externally 3,000,000 Number of chips sold to Western Digital 3,000,000 Number of regular moves in Wafer Fab 2,100,000 Number of photolithographic moves in Wafer Fab 3,190,000 "Sub-Micron" AU l,'l-DU,UUU $244,329,000 $243,584,000