16 - 22-24(30 min Multinational transfer pricing goal...

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22-24 (30 min.) Multinational transfer pricing, goal congruence (continuation of 22-23). 1. After-tax operating income if Mornay Company sold all 1,000 units of Product 4A36 in the United States is Revenues, $600 × 1,000 units $600,000 Full manufacturing costs, $500 × 1,000 units 500,000 Operating income 100,000 Income taxes at 40% 40,000 After-tax operating income $ 60,000 From Exercise 22-23, requirement 1, Mornay Company's after-tax operating income if it transfers 1,000 units of Product 4A36 to Austria at full manufacturing cost and sells the units in Austria is $112,000. Therefore, Mornay should sell the 1,000 units in Austria. 2. Transferring Product 4A36 at the full manufacturing cost of the U.S. Division minimizes import duties and taxes (Exercise 22-23, requirement 2), but creates zero operating income for the U.S Division. Acting autonomously, the U.S. Division manager would maximize division operating income by selling Product 4A36 in the U.S. market, which results in $60,000 in after-tax division operating income as
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