19-52 Transfer Pricing; Ethics Zen Manufacturing Inc. is a multinational firm with sales and manufac- turing units in 15 countries. One of its manufacturing units, in country X, sells its product to a retai unit in country Y for $300,000. The unit in country X has manufacturing costs of $150,000 for these products. The retail unit in country Y sells the product to final customers for $450,000. Zen is consid- ering adjusting its transfer prices to reduce overall corporate tax liability. Required 1. Assume that both country X and country Y have corporate income tax rates of 40% and that no specia tax treaties or benefits apply to Zen. What would be the effect on Zen's total tax burden if the manufac- turing unit raises its price from $300,000 to $360,000? 2. What would be the effect on Zen's total taxes if the manufacturing unit raised its price from $300,000 to $360,000 and the tax rates in countries X and Y are 20% and 40%, respectively? 3. Comment on any ethical issues you observe in this case.
19-52 Transfer Pricing; Ethics Zen Manufacturing Inc. is a multinational firm with sales and manufac- turing units in 15 countries. One of its manufacturing units, in country X, sells its product to a retai unit in country Y for $300,000. The unit in country X has manufacturing costs of $150,000 for these products. The retail unit in country Y sells the product to final customers for $450,000. Zen is consid- ering adjusting its transfer prices to reduce overall corporate tax liability. Required 1. Assume that both country X and country Y have corporate income tax rates of 40% and that no specia tax treaties or benefits apply to Zen. What would be the effect on Zen's total tax burden if the manufac- turing unit raises its price from $300,000 to $360,000? 2. What would be the effect on Zen's total taxes if the manufacturing unit raised its price from $300,000 to $360,000 and the tax rates in countries X and Y are 20% and 40%, respectively? 3. Comment on any ethical issues you observe in this case.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter13: Emerging Topics In Managerial Accounting
Section: Chapter Questions
Problem 49E: Refer to Exercise 13-48. Suppose that Kamber is considering building a new plant inside a foreign...
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Cost Management - Transfer Pricing
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3. Comment on any ethical issues you observe in this case.
![[LO 19-4]
19-52 Transfer Pricing; Ethics Zen Manufacturing Inc. is a multinational firm with sales and manufac-
turing units in 15 countries. One of its manufacturing units, in country X, sells its product to a retail
unit in country Y for $300,000. The unit in country X has manufacturing costs of $150,000 for these
products. The retail unit in country Y sells the product to final customers for $450,000. Zen is consid-
ering adjusting its transfer prices to reduce overall corporate tax liability.
Required
1. Assume that both country X and country Y have corporate income tax rates of 40% and that no special
tax treaties or benefits apply to Zen. What would be the effect on Zen's total tax burden if the manufac-
turing unit raises its price from $300,000 to $360,000?
2. What would be the effect on Zen's total taxes if the manufacturing unit raised its price from $300,000 to
$360,000 and the tax rates in countries X and Y are 20% and 40%, respectively?
3. Comment on any ethical issues you observe in this case.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ff0c87c62-fa79-4006-9333-3cb634145ad9%2F051339d1-314f-42a7-9a7b-e9b12d814b2b%2F36262ob_processed.jpeg&w=3840&q=75)
Transcribed Image Text:[LO 19-4]
19-52 Transfer Pricing; Ethics Zen Manufacturing Inc. is a multinational firm with sales and manufac-
turing units in 15 countries. One of its manufacturing units, in country X, sells its product to a retail
unit in country Y for $300,000. The unit in country X has manufacturing costs of $150,000 for these
products. The retail unit in country Y sells the product to final customers for $450,000. Zen is consid-
ering adjusting its transfer prices to reduce overall corporate tax liability.
Required
1. Assume that both country X and country Y have corporate income tax rates of 40% and that no special
tax treaties or benefits apply to Zen. What would be the effect on Zen's total tax burden if the manufac-
turing unit raises its price from $300,000 to $360,000?
2. What would be the effect on Zen's total taxes if the manufacturing unit raised its price from $300,000 to
$360,000 and the tax rates in countries X and Y are 20% and 40%, respectively?
3. Comment on any ethical issues you observe in this case.
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