Finance

ACC 604 FINAL EXAM PART B

Pots and Pans Distributors, Inc. (P&P) is the distribution company and subsidiary of Cookware

Manufacturing Company. P&P buys its pots and pans from Cookware, its parent company, and

markets them through its three regional sales divisions in North America, Asia and Europe.

John Greer, the president of P&P has just received the divisional income and product reports (attached),

and is very disturbed by the very low (1%) profit margin of the company overall, especially the loss

sustained by the European division. His request to Cookware to reduce transfer prices has been

rejected. He comes to you, a consultant, for help and advice.

Upon interviewing company personnel, you learn that P & P does not prepare operating budgets with

which to plan and control future operations and measure the performance of its managers. Division

managers are paid a fixed salary plus a bonus based upon increases in total sales revenue over the

previous year. You also learn in your interviews that the equipment used by the European Division has

no alternative use and no resale value.

Required: Write your answers to all questions in Word, and for questions 2 through 6,

show your calculations in a neat, orderly fashion. Be sure to indicate the question number

with each answer.

Answer

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