L015-2,3,4 (72 point each). During the current year Q Inc.'s foreign Division A incurred production...
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L015-2,3,4 (72 point each). During the current year Q Inc.'s foreign Division A incurred production costs of $4 million for units that are transferred to its other foreign Division, B. Costs in Division B, outside of the costs of production of the final product are $8 million. These are third-party costs. Sales revenue for the final product for Division B is $30 million. Other companies in the same country import a similar type of part as Division B at a cost of $7 million. Tuesday has set its transfer price at $14 million, justifying this price because of the special controls it has on the operations in Division A as well as its special manufacturing method. The tax rate in the country where Division A is located is 40% while the tax rate for Division B's country is 70%. a. Draw a diagram that identifies the internal buyer, internal seller, and what is transferred to each Division A (internal seller) b. What would Tuesday's total tax liability for both divisions be if it used the $7M transfer price? c. What would the liability be if it used the $14M transfer price
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