17 - 22-24 (Cont'd.) Austrian Division Revenues, $750 1,000...

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Unformatted text preview: 22-24 (Cont'd.) Austrian Division Revenues, $750 1,000 units` Transferred in costs, $600 1,000 units Import duties at 10% of transferred-in price, $60 1,000 units Division operating income Division income taxes at 44% Division after-tax operating income $750,000 600,000 60,000 90,000 39,600 $ 50,400 Total import duties and income taxes at transfer prices of $500 and $600 per unit for 1,000 units of Product 4A36 follow: Transfer Price of $500 per Unit (Exercise 22-23, Requirement 2) (a) U.S. income taxes (b) Austrian import duties (c) Austrian income taxes $ 0 50,000 88,000 $138,000 Transfer Price of $600 per Unit $ 40,000 60,000 39,600 $139,600 The minimum transfer price that the U.S. division manager acting autonomously would agree to results in Mornay Company paying $1,600 in additional import duties and income taxes. A student who has done the calculations shown in Exercise 22-23, requirement 2, can calculate the additional taxes from a $600 transfer price more directly, as follows: Every $1 increase in the transfer price per unit over $500 results in additional import duty and taxes of $0.016 per unit So, a $100 increase ($600 $500) per unit will result in additional import duty and taxes of $0.016 100 = $1.60 For 1,000 units transferred, this equals $1.60 1,000 = $1,600 ...
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