Post a substantive response to the following questions:

a. In this situation, should corporate management be concerned about whether the Consulting Division sells IBM products or those of other computer companies? Should the Consulting Division be required to sell only IBM products?

Corporate management should be paying close attention to whether or not they sell IBM or competitor products. If the consulting division is able to acquire the same products from IBM at the same or lower prices, Consulting Division should be required to buy IBM products. If the Consulting Divisions goal is to maximize its profit contribution to the company then it should not be required to buy exclusively IBM products, particularly when they may be at a higher price than their competitors. The firm would make every effort that this wouldnt cause any client loss, but if so, management should make a cost analysis where if the Consulting Division buys products other than IBMs, the client loss does not outweigh the profit gains achieved through the Consulting Divisions profit.

b. Discuss the transfer-pricing issues that both the Computer Equipment Division manager and the Consulting Division manager should consider. If top management does not have a policy on pricing transfers between these two divisions, what alternative transfer prices should the division managers consider?

What must be considered is the fact that the transfer price covers all relevant costs but at the same time benefits the entire firm, by trying to achieve prices lower than competing firms. In addition to transfer prices meeting all costs, but there should be a defined fixed markup to adds value to both divisions of IBM.

What is your recommendation regarding how the managers of the Consulting and Computer Equipment Divisions can work together in a way that will benefit each of them individually and the company as a whole?

Both managers have to understand theyre arms of the same firm, or company. If one division conducts practices beneficial to them but decreases the overall companys value, then they both fail. Prices should be set where both divisions are able to benefit, while adding the most amount of value possible to the entire company. When no clear option or avenue exists between the two divisions, the option that adds the most value to the overall company is the most viable option.