{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# Ch22 - CHAPTER 22 MANAGEMENT CONTROL SYSTEMS TRANSFER...

This preview shows pages 1–4. Sign up to view the full content.

CHAPTER 22 MANAGEMENT CONTROL SYSTEMS, TRANSFER PRICING, AND MULTINATIONAL CONSIDERATIONS 22-19 Multinational transfer pricing, effect of alternative transfer-pricing methods, global income tax minimization. 1. This is a three-country, three-division transfer-pricing problem with three alternative transfer-pricing methods. Summary data in U.S. dollars are: China Plant Variable costs: 1,000 Yuan ÷ 8 Yuan per \$ = \$125 per subunit Fixed costs: 1,800 Yuan ÷ 8 Yuan per \$ = \$225 per subunit South Korea Plant Variable costs: 360,000 Won ÷ 1,200 Won per \$ = \$300 per unit Fixed costs: 480,000 Won ÷ 1,200 Won per \$ = \$400 per unit U.S. Plant Variable costs: = \$100 per unit Fixed costs: = \$200 per unit Market prices for private-label sale alternatives: China Plant: 3,600 Yuan ÷ 8 Yuan per \$ = \$450 per subunit South Korea Plant: 1,560,000 Won ÷ 1,200 Won per \$ = \$1,300 per unit The transfer prices under each method are: a. Market price China to South Korea = \$450 per subunit South Korea to U.S. Plant = \$1,300 per unit b. 200% of full costs China to South Korea 2.0 × (\$125 + \$225) = \$700 per subunit South Korea to U.S. Plant 2.0 × (\$700 + \$300 + \$400) = \$2,800 per unit c. 300% of variable costs China to South Korea 3.0 × \$125 = \$375 per subunit South Korea to U.S. Plant 3.0 × (\$375 + \$300) = \$2,025 per unit

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document