Globoss is a multinational company with divisions in a number of countries. In the Asia-pacific rim, Globoss has a division in Australia (OzBoss division) and a division in New Zealand (KiwiBoss division). The purpose of these two divisions is to have access to opportunities offered in each country and the Trans-Tasman trade agreement between the two countries.

KiwiBoss manufactures a number of products including a product (called a Gozinta) that is used as one of the component parts of a product (Comesouta) produced and sold by OzBoss in Australia. KiwiBoss plant is working at capacity to produce all its products including 15,000 units of Gozinta, which it sells to OzBoss. KiwiBoss costs total $64 per unit and would represent a cost-based transfer pricing method.

A similar substitute product to Gozinta can be purchased in Australia by OzBoss for $75 per unit. Therefore $75 represent a market-based transfer pricing method. OzBoss sells the completed product for $AU120. The data in Table 1 has been collected.

Description	KiwiBoss	OzBoss
Manufacturing costs	$60	Not applicable
Shipping costs from NZ to Australia	$4	Not applicable
Tax Rate	40c in the dollar (40%)	30c in the dollar (30%)

Required

1- Calculate and identify the minimum transfer price and the maximum transfer price that would be acceptable to KiwiBoss and OzBoss. Provide your reasoning why these two separate transfer prices are the two acceptable prices.

2- Calculate the net profit after tax (NPAT) for Globoss using both the cost-based transfer pricing method and the for market-based transfer pricing method.

3- Compare the two NPAT results from requirement 2. Identify which transfer price method that will maximise the net profit after tax (NPAT) for Globoss and explain why.

4- A new business starts operation in New Zealand and is willing to purchase 8,000 Gozinta units for A$68 each unit from KiwiBoss. As KiwiBoss is at full production capacity, OzBoss will need to purchase these 8,000 from outside the Globoss entity if KiwiBoss accepts this purchase offer. Calculate the NPAT for KiwiBoss, OzBoss, and Globoss for this new purchase offer. Using the calculations from requirements 2 and 6, identify which option the management of KiwiBoss, OzBoss, and Globoss will prefer and explain why.

5- Globoss uses a traditional financial measure NPAT to evaluate performance of its divisions. Identify and explain which transfer price method be acceptable for the KiwiBoss and OzBoss division manager. If they would prefer a different transfer pricing method, explain the possible dysfunctional behaviour that could result if Globoss uses NPAT to evaluate performance.

6- It has been stated that using the traditional financial measure NPAT to evaluate performance will encourage managers viewing themselves as silos. Explain the following two questions:

a- Provide one example of the disadvantages of a silo view for each manager.

b- Provide one example of a non-financial measure alternative to NPAT that will measure each managers performance while minimising a lack of goal congruency among

managers caused by NPAT.