week 4 assignment accounting

You will utilize the information in this week’s Resources and your course text to consider how transfer pricing decisions might apply to organizational decision making. There is also an Excel template provided in the same entry that you may find helpful in completing this Assignment.

The Assignment:

  • Part 1: Analyze the effect of both full-cost and variable-cost transfer pricing methods on cash flows using a spreadsheet program such as Excel.

AutoManf Controllers Inc. manufactures robotic controllers in Division A, a country with a 30% income tax rate, and transfers them to Division B, a country with a 40% income tax. An import duty of 15% of the transfer price is paid on all imported products. The import duty is not deductible in computing taxable income. The controller’s full cost is $1,500 and variable cost is $900; they are sold by Division B for $2,100. The tax authorities in both countries allow firms to use either variable cost or full cost as the transfer price.

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