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Unformatted text preview: 22-32(Cont’d.)Any transfer price between $700,000 and $800,000 will achieve the optimal actions determined in requirement 1. For prices in this range, Anita Corporation will be willing to sell, the Brazilian Corporation willing to buy, and the Swiss subsidiary not interested in acquiring the machine.Where within the range of $700,000 to $800,000 that the transfer price will be set depends on the bargaining powers of the Anita Corporation and the Brazilian subsidiary managers. Anita Corporation's main source of bargaining power comes from the threat of selling the machine to the Swiss subsidiary. If the transfer price is set at $700,000, thenAnita's operating income, $700,000 – $500,000 $200,000Brazilian subsidiary's operating income, $1,000,000 – $700,000 – $200,000100,000Overall operating income of Anita and subsidiaries$300,000Note that the general guideline could be used to derive the minimum transfer price....
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- Spring '10
- Financial Accounting, Corporation, Subsidiary, Anita, Anita Corporation