Phipps manufactures circuit boards in Division A,
Phipps manufactures circuit boards in Division A, a country with a 30% income tax rate, and transfers them to Division B, a country with a 40% income tax. An import duty of 15% of the transfer price is paid on all imported products. The import duty is not deductible in computing taxable income. The circuit boards' full cost is $1,000 and variable cost is $700; they are sold by Division B for $1,200. The tax authorities in both countries allow firms to use either variable cost or full cost as the transfer price.
The Assignment:
Part 1: Analyze the effect of both full-cost and variable-cost transfer pricing methods on Phipps’ cash flows using a spreadsheet program such as Excel.
Part 2: Make your recommendation as to how the organization should proceed, being sure to justify your recommendation with examples form this week’s resources, and/or additional research. Complete this aspect of the Assignment by using a word processing program such as Word.
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$10.00ANSWERTutor has posted answer for $10.00. See answer's preview
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Click here to download attached files:Solution-Phipps manufactures.xlsx
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$10.00ANSWERTutor has posted answer for $10.00. See answer's preview
****** manufactures circuit ****** ** Division *
Click here to download attached files:philips.xlsx
