Exercise 15-31 (Algo) International Transfer Prices: Ethical Issues (LO 15-4)Whitehill Chemicals has two operating divisions. Its Formulation Division In the United States mixes, processes, and tests basicchemicals, and then ships them to Ireland, where the company's Commercial Division uses the chemicals to produce and sell variousproducts. Operating expenses amount to $277 million in the US. and $79.7 million in Ireland exclusive of the costs of any goodstransferred from the US. Revenues In Ireland are $212 million.If the chemicals were purchased from one of the company's Irish mixing divisions, the costs would be $40.7 million. However, if it hadbeen purchased from an Independent U.S. supplier, the cost would be $53.7 million. The marginal income tax rate is 20 percent in theU.S. and 12 percent in Ireland.Required:What is the company's total tax liability to both jurisdictions for each of the two alternativé transfer pricing scenarios ($40.7 million and$53.7 million)?Note: Enter your answers in dollars and not in millions of dollars.Transfer price40.7 million53.7 millionTotal tax liability

Answered: Image /qna-images/answer/9d81b8c2-3895-4a1c-9203-35f4fb47a7f4.jpg

Answered: Exercise 15-31 (Algo) International…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 6CE

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Whitehill Chemicals has two operating divisions. Its Formulation Division in the United States mixes, processes, and tests basic chemicals, and then ships them to Ireland, where the company's Commercial Division uses the chemicals to produce and sell various products. Operating expenses amount to $27.2 million in the U.S. and $79.2 million in Ireland exclusive of the costs of any goods transferred from the U.S. Revenues in Ireland are $207 million. If the chemicals were purchased from one of the company's Irish mixing divisions, the costs would be $40.2 million. However, if it had been purchased from an independent U.S. supplier, the cost would be $53.2 million. The marginal income tax rate is 20 percent in the U.S. and 12 percent in Ireland. Required: What is the company's total tax liability to both jurisdictions for each of the two alternative transfer pricing scenarios ($40.2 million and $53.2 million)? Note: Enter your answers in dollars and not in millions of dollars. Total tax…
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Bollozos Afterlife Corporation's Division A manufactures and sells product Brand X, which is used in refrigeration systems. Per-unit variable manufacturing and selling costs amount to P20 and P5, respectively The Division can sell this item to external domestic customers for P36 or, alternatively, transfer the product to the company's Division B. Division B is currently purchasing a similar unit from Taiwan for P33. Assume use of the general transfer-pricing rule. •What is the most that the Division B would be willing to pay the Division A for one unit? • If Division A had excess capacity, what transfer price would the Division's management set? · If Division A had no excess capacity, what transfer price would the Divisions management set? If Division A had no excess capacity, what transfer price would the Divisions management set assuming that Division A was able to reduce the variable cost of internal transfers by P4 per unit
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…
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…
Required information [The following information applies to the questions displayed below.] Illinois Metallurgy Corporation has two divisions. The Fabrication Division transfers partially completed components to the Assembly Division at a predetermined transfer price. The Fabrication Division's standard variable production cost per unit is $550. The division has no excess capacity, and it could sell all of its components to outside buyers at $770 per unit in a perfectly competitive market. Required: 1. Determine a transfer price using the general rule. Transfer price
Required information [The following information applies to the questions displayed below.] Illinois Metallurgy Corporation has two divisions. The Fabrication Division transfers partially completed components to the Assembly Division at a predetermined transfer price. The Fabrication Division's standard variable production cost per unit is $550. The division has no excess capacity, and it could sell all of its components to outside buyers at $770 per unit in a perfectly competitive market. 2. What would be the transfer price if the Fabrication Division had excess capacity? Transfer price < Prev 7 of 7 Next hulu
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Due to rising labor costs in Malaysia, Domain Computer, based in Singapore, is considering shorting 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. Andrew 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.

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