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Timken case Study The Automotive Division of Timken expressed concern that the transfer pricing policy for steel transfers did not allow the automotive division to
Timken case Study
- The Automotive Division of Timken expressed concern that the transfer pricing policy for steel transfers did not allow the automotive division to exercise its considerable market power as a purchaser of bearings quality steel. Do you think their concerns were valid?
- Comment on the usefulness of the "Minimum Rule."
- Examine the margins of both the cone assembly C-400 and the cup CU-260 (Exhibits 9 and 10). Provide an estimate of the relevant cost of manufacturing these cups and cones both from the perspective of the automotive division and from the corporate perspective.
- Did Timken's policy of market-based transfer pricing rules for steel products "work" for the company? Specifically, did this policy provide divisional managers at the steel and automotive division with desirable information and incentives?
- In the past, Timken valued internal steel transfers at cost. What would be the advantages and disadvantages of cost-based transfer prices compared to market-based prices.
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