Your local fast food chain with two dozen stores uses the co

Your local fast food chain with two dozen stores uses the company\'s internal corporate marketed department to produce signage, print ads, in-store displays, and so forth. When placing an order, store managers are assessed a chargeback (transfer price) that reduces store profitability but increases marketing department profitability. Lately, store managers have been ordering more and more marketing services; the marketing department is swamped, and it cannot afford to hire more staff. What does this indicate about the chargeback rates?

Solution

Here, as we can see that due to the chargeback rates, store profitability is reduced but it increases marketing profitability, and as mentioned that the store managers have been ordering more and more marketing services the marketing department is swamped it indicates that the is a need for more allotment of money in marketing department, the chargeback rates are low, as as there is a requirement to hire more staff, we need to increase the rates of chargeback.