05 - 22-18 (35 min.) Multinational transfer pricing, effect...

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Unformatted text preview: 22-18 (35 min.) 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: Fixed costs: South Korea Plant Variable costs: Fixed costs: U.S. Plant Variable costs: Fixed costs: = $100 per unit = $200 per unit 360,000 Won 1,200 Won per $ = $300 per unit 480,000 Won 1,200 Won per $ = $400 per unit 1,000 Yuan 8 Yuan per $ = $125 per subunit 1,800 Yuan 8 Yuan per $ = $225 per subunit 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 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 300% of variable costs China to South Korea b. c. 3.0 $125 = $375 per subunit South Korea to U.S. Plant 3.0 ($375 + $300) = $2,025 per unit ...
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This note was uploaded on 02/05/2012 for the course ACCOUNTING acct 504 taught by Professor Dehmal during the Spring '10 term at DeVry Pittsburgh.

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05 - 22-18 (35 min.) Multinational transfer pricing, effect...

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