Kathy Craven is the CEO and president of legal solutions Inc. she oversees the companies two divisions, human resource and litigation. The human resource division provides legal services to personnel department at various clients who need help creating personal policies and manuals. The litigation division provides legal services to support clients in litigation. Litigation often asked for help from human resources when faced with issues surrounding personnel policies, but also has the option of seeking help outside the firm currently human resources is below capacity and uses a variable cost as its price for providing services to litigation.

Since each division is evaluated by how much profit it generates human resources, would like to increase the price charged to litigation. Litigation is steadfast against any changes. Kathy Craven has stepped in and establish the following policy effective immediately, human resources will charge litigation variable cost +20% for any services rendered internally

1. Why is the human resources division manager concerned about the price it charges to litigation?

2. Why is the litigation division manager concerned about the increase in price charge by human resource division?

3. Do you think Kathy's plan is effective? Explain.

4. What other options are available for establishing transfer pricing

suggested length is about 500 to 700 words one or two pages