Question: Required: Affiliate A sells 6 , 2 0 0 units to Affiliate B per year. The marginal income tax rate for Affiliate A is 2

Required:
Affiliate A sells 6,200 units to Affiliate B per year. The marginal income tax rate for Affiliate A is 25 percent and the marginal income tax rate for Affiliate B is 40 percent. The transfer price per unit is currently $2,000, but it can be set at any level between $2,000 and $2,400. Derive a formula to determine how much annual after-tax profits can be increased by selecting the optimal transfer price. Note: Do not round intermediate calculations.
Required: Affiliate A sells 6,200 units to Affiliate B per year.

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