transfer price
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Conner Manufacturing has one plant located in Italy and another plant located in the United States. The Italian plant manufactures a component used in a finished product manufactured at the U.S. plant. Currently, the Italian plant is operating at 75 per cent capacity. In Italy, the income tax rate is 32 per cent; in the United States, the corporate income tax rate is 35 per cent.
The market price of the component is £240 and the Italian plant's costs to manufacture the component are as follows:
Direct materials £60
Direct labour 40
Variable
Fixed overhead 30
Which transfer price would be in the best interest of the overall company?
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- Mossfort, Inc., has a division in Canada that makes long-lasting exterior wood stain. Mossfort has another U.S. division, the Retail Division, that operates a chain of home improvement stores. The Retail Division would like to buy the unique, long-lasting wood stain from the Canadian division, since this type of stain is not currently available. The Exterior Stain Division incurs manufacturing costs of 13.45 for one gallon of stain. If the Retail Division purchases the stain from the Canadian division, the shipping costs will be 1.40 per gallon, but sales commissions of 0.75 per gallon will be avoided with an internal transfer. The Retail Division plans to sell the stain for 32.80 per gallon. Normally, the Retail Division earns a gross margin of 35 percent above cost of goods sold. Required: 1. Which Section 482 method should be used to calculate the allowable transfer price? 2. Calculate the appropriate transfer price per gallon. (Round to the nearest cent.)Gregg Manufacturing has one plant located in Belgium and another plant located in the United States. The Belgium plant manufactures a component used in a finished product manufactured at the U.S. plant. Currently, the Belgium plant is operating at 70 per cent capacity. In Belgium, the income tax rate is 30 per cent; in the United States, the corporate income tax rate is 35 per cent. The market price of the component is £280 and the Belgium plant's costs to manufacture the component are as follows: Direct materials £30Direct labour 50Variable overhead 12Fixed overhead 56 Refer to Figure 20-10. What is the minimum transfer price that the Belgium division would be willing to accept? Group of answer choices £280 £148 £136 £92The Burton Company manufactures chainsaws at its plant in Sandusky, Ohio. The company has marketing divisions throughout the world. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. The following information is available: U.S. income tax rate on the U.S. division’s operating income 40% French income tax rate on the French division’s operating income 45% French import duty 20% Variable manufacturing cost per chainsaw $100 Full manufacturing cost per chainsaw $175 Selling price (net of marketing and distribution costs) in France $300 Suppose the United States and French tax authorities only allow transfer prices that are between the full manufacturing cost per unit of $175 and a market price of $250, based on comparable imports into France. The French import duty is charged on the price at which the product is transferred into France. Any import duty paid to the French authorities is a deductible expense for calculating French income…
- The Burton Company manufactures chainsaws at its plant in Sandusky, Ohio. The company has marketing divisions throughout the world. A Burton marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. The following information is available: U.S. income tax rate on the U.S. division’s operating income 40% French income tax rate on the French division’s operating income 45% French import duty 20% Variable manufacturing cost per chainsaw $100 Full manufacturing cost per chainsaw $175 Selling price (net of marketing and distribution costs) in France $300 Suppose the United States and French tax authorities only allow transfer prices that are between the full manufacturing cost per unit of $175 and a market price of $250, based on comparable imports into France. The French import duty is charged on the price at which the product is transferred into France. Any import duty paid to the French authorities is a deductible expense for calculating French income…Nashville Co. presently incurs costs of about 12 million Australian dollars (A$) per year for research and development expenses in Australia. It sells the products that are designed each year, and all of the products sold each year are invoiced in U.S. dollars. Nashville anticipates revenue of about $20 million per year, and about half of the revenue will be from sales to customers in Australia. The Australian dollar is presently valued at $1 (1 U.S. dollar), but it fluctuates a lot over time. Nashville Co. is planning a new project that will expand its sales to other regions within the United States, and the sales will be invoiced in dollars. Nashville can finance this project with a 5-year loan by (1) borrowing only Australian dollars, or (2) borrowing only U.S. dollars, or (3) borrowing one-half of the funds from each of these sources. The 5-year interest rates on an Australian dollar loan and a U.S. dollar loan are the same. If Nashville wants to use the form of financing that will…A Chinese automobile company is going to use one of its unused manufacturing plants in China to produce 20,000 cars a year. The cars will then be sold in the United States for $40,000 per vehicle. The plant has been fully depreciated. Production and assembly costs in China will be RMB 120,000 per vehicle and selling and administrative costs in the U.S. will be $30 million per year. The company will pay taxes in China at a rate of 35% and will not pay taxes in the U.S. Assume the current exchange rate is 7 RMB/$. It is expected that the plant will operate for 5 years and then cease operations. What are the expected yearly sales, expressed in RMB, assuming the current exchange rate? 5,600,000,000 800,000,000 560,000,000 3,600,000,000 What is the expected yearly net after-tax cash flow, expressed in RMB, assuming the exchange rate stays constant? 5,600,000,000 1,943,500,000 3,170,000,000 2,990,000,000 What is the change in cash flow, in RMB, if the RMB appreciates to 6.5…
- Due to rising labor costs in Malaysia, Domain Computer, based in Singapore, is considering shifting part of its production facilities from Malaysia to an emerging market, Vietnam, to better integrate its supply chain in the South east Asia region. John Lawson, the CFO of the company, estimates that Domain Computer needs to invest USD735,000 to acquire an existing factory in Vietnam and another USD285,000 in renovations and installation of new machineries. The cost of training new workers is estimated to be USD310,000. He believes that the new factory will lead to an estimated USD928,000 savings in labor costs and another USD417,000 savings in logistics expenses. Required: Use cost-benefit analysis to recommend whether Domain Computer should shift parts of its production facilities from Malaysia to Vietnam. Explain your answer. You are required to write 500 to 800 words. ( Currently I have completed my Cost-benefit analysis; but I am confused as to how to use PESTLE's analysis with…Wellington Manufacturing manufactures industrial ovens used primarily in the process of coating or painting metals. The ovens are sold throughout the world, and units are manufactured to customers’ specifications. On June 15, the company committed to sell two ovens to a major transnational customer.One of the ovens has a selling price of $549,600 and is to be paid for with foreign currency A (FCA). The other unit has a selling price of $297,975 and is to be paid for with foreign currency B (FCB). Both units were shipped, FOB shipping point, on September 15, and payment is due within 30 days of shipment. In order to hedge against exchange rate risks,Wellington acquired two put options on June 15 with notional amounts equal to the respective foreign currency selling prices. The options expire on October 15, and customer remittances are also received on October 15. Relevant information concerning the options and exchange rates is as shown: Fair Value of Option June 15 September 15…The Motor Division of Sym Corporation uses 5,000 carburetors per month in its production of automotive engines. It presently buys all of the carburetors it needs from two outside suppliers at an average cost of $100. The Carburetor Division of Dynamic Engine Corporation manufactures the exact type of carburetor that the Motor Division requires. The Carburetor Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at $106 per unit. Its cost structure (on 15,000 units) is:Variable production costs $70Variable selling costs 10All fixed costs 10Assume that the Carburetor Division would not incur any variable selling costs on units that are transferred internally. Questions: 1. Refer to Sym Corporation. What is the maximum of the transfer price range for a transfer between the two divisions? 2. Refer to Sym Corporation. What is the minimum of the transfer price range for a transfer…
- The Engine Division of Murphy Motor Corporation uses 5,000 carburetors per month in its production of automotive engines. It presently buys all of the carburetors it needs from two outside suppliers at an average cost of $100. The Carburetor Division of Murphy Motor Corporation manufactures the exact type of carburetor that the Engine Division requires. The Carburetor Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at $106 per unit. Its cost structure (on 15,000 units) is: Variable production costs $70 Variable selling costs 10 All fixed costs 10 Assume that the Carburetor Division would not incur any variable selling costs on units that are transferred internally. Refer to Murphy Motor Corporation. What is the minimum of the transfer price range for a transfer between the two divisions? Select one: a. $70 b. $90 c. $96 d. $106The Engine Division of Murphy Motor Corporation uses 5,000 carburetors per month in its production of automotive engines. It presently buys all of the carburetors it needs from two outside suppliers at an average cost of $100. The Carburetor Division of Murphy Motor Corporation manufactures the exact type of carburetor that the Engine Division requires. The Carburetor Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at $106 per unit. Its cost structure (on 15,000 units) is: Variable production costs $70 Variable selling costs 10 All fixed costs 10 Assume that the Carburetor Division would not incur any variable selling costs on units that are transferred internally. Refer to Murphy Motor Corporation. If the two divisions agree to transact with one another, corporate profits will Select one: a. drop by $30,000 per month b. rise or fall by an amount that depends on the level of the…The Engine Division of Murphy Motor Corporation uses 5,000 carburetors per month in its production of automotive engines. It presently buys all of the carburetors it needs from two outside suppliers at an average cost of $100. The Carburetor Division of Murphy Motor Corporation manufactures the exact type of carburetor that the Engine Division requires. The Carburetor Division is presently operating at its capacity of 15,000 units per month and sells all of its output to a foreign car manufacturer at $106 per unit. Its cost structure (on 15,000 units) is: Variable production costs $70 Variable selling costs 10 All fixed costs 10 Assume that the Carburetor Division would not incur any variable selling costs on units that are transferred internally. Refer to Murphy Motor Corporation. What is the minimum of the transfer price range for a transfer between the two divisions?