North country auto , inc .

Was a company the dealer being also had authorization to to

serve some brands a car as it ford , saab , and volkswagen .North country auto having two
partners , namely george liddy and andrew jones .Andrew jones is the possessor noerth country
auto making their first since the company is established , while george liddy new join the last
few years .When george liddy join , companies experienced changes inside the system control
company management .
North Country Auto, Inc. has five departments or business units, i.e. New Car Sales, Used
Car Sales, Service, Parts, and Body Shop. Before Mr. Liddy joined the company, North Country
Auto, Inc. all departments and business units operate as one business entity (centralization).
Managers of each business unit to be rewarded with a fixed monthly remuneration and bonuses
that are subjectively determined the top management of the performance of each manager.
Mr .Liddy assume that the system did not provide the motivation to managers and
employees to work better for the company .Because of it , mr .Liddy make changes by applying a
decentralized system against bisnis-unit relations and the responsibility of business units in the
company .By applying decentralization , given the trust as the center business units profit ( profit
center and operate as if they are companies that stand alone.
This change has had an impact on the system change in return or given incentive.Any
manager besides obtain basic salary of berifat fixed, also get a bonus in accordance
denganperformance department, for example based on a percentage of gross profits.In this way
each department manager motivated to do better particularly in improving the performance of the
department of each.This seems to be the weakness of excellence as well as for the new system of
the usGoal congruence happened due to the implementation of a decentralized system this.

Answer :
1. Computing the profitability of transaction described
Sales
Gross Profit
Number of Units
Sales Commision

$5000
1014
1
250

Overhead Cost
Profit
2.

665
$99

In my opinion , will be better if the transfer pricing done based on the price of the market
price ) .In accordance with market price not mean the same with the price of retail , but in
accordance with the market price when the company outside do long-term cooperation
with north country auto .However , the company north country auto , inc . Introduced a
bonus for the manager based on a percentage of gross profit the department business units
.Not fair when the department one must provide resources for the department of the other
by not taking the margin of iota ( for example when using full cost in the transfer
pricing ) , so that the profitability of the department concerned will decline caused by
pricing i think this is not favorable .

3. If one week later it was discovered that trade in goods which was originally can be sold at
a wholesale price $ 3500 can only are sold in wholesale with the price of $ 3000, then
that is supposed to be responsible for the loss was manager used car departement.
4. Years ago there was a loss of $ 59,000 on used car department .May be , the loss was due
to the decision to delay car sales in the wholesale price ( that time $ 3500 because the
manager wants to get a margin greater at a price $ 5000 .
5.

In my opinion , evaluation of the performance of the department or business units north

country auto company , inc . Better measured based on gross profit compared with the
full cost profit .The reason is , because in the full cost profiti , including in it has been
non opersional fixed costs and perhaps out of control of the department concerned , such
as the depreciation , the cost of advertising , and the commission .

6.

In a meeting between the land owners, this is george liddy, with managers department,
the department made known and performance of the major from being as it is with the
performance of the company as a whole.It is possible for the granting of the
compensation based on the performance of which cause problems relating to the goal
congruence it appears.The solution should do it is to make a change in the the system of
compensation, that compensation or insentive besides based on gross profit but also in
co-operation department kesanggupan antardepartemen ( crossfunctional organization )
causing keefisienan ' s output for the better.