Lewis_Corporation

Table of Contents

1. Summary of Organization 1

2. Problem Statement 2

3. Analysis of Problem Information 2

4. Solution 3

  Option 1: Negotiated Pricing 3

  Option 2: Full cost pricing + 10% profit. 4

  Option 3: Market-based transfer price 4

5. Conclusion & Recommendation 5

  Summary of Organization

Lewis Corporation is a large manufacturing organization. It manufactures office equipments and copier products on large scale. The organization currently has several departments and divisions. Some of them manufacture the intermediary products which are sold to internal divisions within the organization and some manufacture the final product to be sold to the customers. The case describes namely two Lewis Corporation divisions, the electronics division, which manufactures circuit boards and sells it to copy products division, and copy products division, which manufactures the final product, copiers, and sells it to the customers. All the divisions have their independent management and policies to operate. As per the Mintzberg model, the heavy reliance of the organization on standardization of processes and the multi-divisional characteristic of the Lewis Corporation classifies it as being Machine bureaucracy and Divisional Form organization. Such divisional organizations heavily rely upon the standardization of outputs. The organization is also reliant upon the standardization of the work processes in manufacturing products. Initially electronic center is categorized as the cost center as its objective is to produce the circuit boards by using labor, material and supplies and sell them to copier division. Whereas, the Copier division is a profit center for Lewis Corporation as it manufactures the final product and sells it to the customers ensuring profit generation for the organization. The fact that the processes in the organization are well described and its outputs are measurable; it puts the organization into the 1st quadrant of Ouchi...