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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- Riverbend Semiconductor Corporation (RSC) is an Arizona corporation engaged in the manufacture and sale of semiconductors and other computer equipment. RSC spent $3.5 million on research and experimentation costs, and all its research and experimentation activity was conducted in the United States. The company handles its export sales through sales branches in Ireland and Taiwan. Total foreign sales from the foreign branches were $8.2 million and worldwide sales were $20.5 million. What amount of the total research and experimentation expense will be apportioned to foreign source income?An Australian company has two manufacturing plants, one in Australia and the other in a Southeast Asian country. Both produce the same product, each for sale in their respective countries. However, their labour productivity and capital productivity figures are quite different. The analyst thinks this is because the Australian plant uses more automated equipment for processing while the other plant uses a higher percentage of labour. In your own words, explain how the aforementioned factors can cause productivity figures to be misleading. Is there another way to compare the two plants that would be more meaningful?It costs Sohar Company OMR 12 of variable and OMR 5 of fixed costs to produce one unit of production which normally sells for OMR 35. A foreign wholesaler offers to purchase 3,000 units at OMR 15 each. the company would incur special shipping costs of OMR 1 per unit if the order were accepted. Assuming that the company has the excess operating capacity to produce the 3,000 units. If the special order is accepted, what will be the effect on net income? Select one: Oa. None of the answers are correct Ob. OMR 6,000 increase O c. OMR 9,000 decrease O d. OMR 45,000 increase O e. OMR 6,000 decrease
- The Department of Defense uses an area cost factor (ACF) to compensate for variations in construction costs in different parts of the country and world. If a cold storage warehouse cost $1,150,000 in Rapid City, South Dakota, where the ACF is 0.95, and the cost of a similar facility built in Andros Island, The Bahamas, is $2,500,000, what is the ACF for Andros Island? The ACF for Andros Island isCompany A manufactures two products A and B that sells for 120 € and 80 € respectively. Each product uses only one type of raw materials that costs € 6 per kilogram. The company has the capacity to annually produce 100,000 units of each product. The company considers its traceable fixed mahufacturing overhead to be avoidable and its common fixed expenses are unavoidable and have been allocated to products based on sales in euros. The Company's average cost per unit for each product at the annual level of activity is provided in the table. Items Product costs in euro A B Direct materials 30 12 Direct labor 20 15 Variable manufacturing overhead 7 5 Traceable fixed manufacturing overhead 16 18 Variable selling expenses 12 8 Common fixed expenses 15 10 Total costs per unit 100 68 (Answer each question independently unless instructed otherwise) Calculate what is the company's total amount of common fixed expenses.A British-made component costs 151 U.K. pounds. A company in the United States needs to buy these components and the current indirect quote indicates that one dollar will buy 0.89 pounds. Ignoring transactions costs, how much will one component cost in U.S. dollars? Instruction: Type your answer in dollars, and round to two decimal places.
- Renke Inc. is in the corn-milling industry but to date has had only enough manufacturing space for one joint process. Renke refers to its two products as prime products and by-products. There is a market for both products, but, as the names imply, the prime products are what Renke got into business to sell, as the prime products' sales price far exceeds that of the by-products. In a typical production run, which costs $60,000, Renke Inc. produces the following products, which can be sold at the prices shown. Prime products By-products Quantity Produced 1,625 tons 875 tons Sales Price per Ton $50 $5 Because Renke's customers (the corn processors) count on purchasing top-quality raw material from Renke, it is important that the company maintains a steady amount of inventory. For this reason, Renke never completely sells out of its products. For the current production run, managers plan to sell 80% of each product immediately, holding 20% in inventory to carry into the next period.Durham Corporation in Illinois, U.S. manufactures and sells three different types of high-quality sealed ball bearings for mountain bike wheels. The bearings vary in terms of their quality specifications—primarily with respect to their smoothness and roundness. They are referred to as Fine, Extra-Fine, and Super-Fine bearings. Machine time is limited. More machine time is required to manufacture the Extra-Fine and Super-Fine bearings. Additional information is provided below.(Currency unit: U.S. Dollars, $) Product Fine Extra-fine super-fine Selling price 6.00$ 10.00$ 16.00$ Variable costs and expenses 4.00 6.50 11.00 Contribution margin 2.00$ 3.50$ 5.00$ Machine hours required 0.02 0.04 0.08 (Instructions) Ignoring the machine time constraint, what strategy would appear optimal? What is the contribution margin per unit of limited resource for each type of bearing? If additional machine time…Company A manufactures two products A and B that sells for 120€ and 80€ respectively. Each product uses only one type of raw materials that costs 6€ per kilogram. The company has the capacity to annually produce 100000 units of each product. The company considers its traceable fixed mahufacturing overhead to be avoidable and its common fixed expenses are unavoidable and have been allocated to products based on sales in euros. Company's average cost per unit for each product at annual level of activity is provided in the table. Items Product costs in euro A B Direct materials 30 12 Direct labour 20 15 Variable manufacturing overhead 7 5 Traceable fixed manufacturing overhead 16 18 Variable selling expenses 12 8 Common fixed expenses 15 10 Total costs per unit 100 68 (Answer each question independently unless instructed otherwise) Assume that Company normally produces and sells 40000 units of product B per year. Evaluate, what is the financial advantage…
- 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 $26.6 million in the U.S. and $78.6 million in Ireland exclusive of the costs of any goods transferred from the U.S. Revenues in Ireland are $201 million. If the chemicals were purchased from one of the company's Irish mixing divisions, the costs would be $39.6 million. However, if it had been purchased from an independent U.S. supplier, the cost would be $52.6 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 ($39.6 million and $52.6 million)? Note: Enter your answers in dollars and not in millions of dollars. Total tax…Razr-Tech Manufacturing Ltd produces specialised computer parts for computer manufacturers around the world. Apart from the central processing unit (CPU), graphics processing unit (GPU), motherboard and Random Access Memory (RAM), Razr also produces small microprocessors. Two of its microprocessors are the Snapdragon and Exynos. The Snapdragon is sold at $300 per unit while the Exynos is sold at $440 per unit. In 2023, demand for the Snapdragon is expected to be 24,000 units while demand for Exynos is expected to be 6,000 units. Estimated beginning inventory in 2023 for Snapdragon and Exynos are expected to be 600 and 300 units respectively, while the company desires to have ending inventory of 500 and 200 units respectively for Snapdragon and Exynos. Additional information for the production of Snapdragon and Exynos follows: Finished Components Snapdragon Exynos Requirements for each finished product: xe37 10 grams 8 grams APQ8064 0 4 grams mm855 Plus 4 grams 2 grams Direct labour 2…Company A manufactures two products A and B that sells for 120 € and 80 € respectively. Each product uses only one type of raw materials that costs € 6 per kilogram. The company has the capacity to annually produce 100,000 units of each product. The company considers its traceable fixed mahufacturing overhead to be avoidable and its common fixed expenses are unavoidable and have been allocated to products based on sales in euros. The Company's average cost per unit for each product at the annual level of activity is provided in the table. Items Product costs in euro A B Direct materials 30 12 Direct labor 20 15 Variable manufacturing overhead 7 5 Traceable fixed manufacturing overhead 16 18 Variable selling expenses 12 8 Common fixed expenses 15 10 Total costs per unit 100 68 (Answer each question independently unless instructed otherwise) Assume that the Company expects to produce and sell 90000 units of product B during the current year. A new customer…
