SEMO Inc. has a division located in Spain and another in the U.S. The Spanish division...
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SEMO Inc. has a division located in Spain and another in the U.S. The Spanish division produces a part needed for the product made by the U.S. division. There is substantial excess capacity in the Spanish division. The tax rate of the Spanish division is 35% and U.S. division tax rate is 30%. The part sells externally for P75 and the Spanish division's manufacturing costs are: Direct material Direct labor Variable overhead Fixed overhead P32 12 6 19 Required: 1) What would be the lowest acceptable transfer price for the Spanish division? 2) What would be the highest acceptable transfer price for the U.S. division? (3) What would be the transfer price that would be the best for SEMO Inc. and why? SEMO Inc. has a division located in Spain and another in the U.S. The Spanish division produces a part needed for the product made by the U.S. division. There is substantial excess capacity in the Spanish division. The tax rate of the Spanish division is 35% and U.S. division tax rate is 30%. The part sells externally for P75 and the Spanish division's manufacturing costs are: Direct material Direct labor Variable overhead Fixed overhead P32 12 6 19 Required: 1) What would be the lowest acceptable transfer price for the Spanish division? 2) What would be the highest acceptable transfer price for the U.S. division? (3) What would be the transfer price that would be the best for SEMO Inc. and why?
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1 The lowest acceptable transfer price for the Spanish division would be the variable cost of produc... View the full answer
Related Book For
Financial Reporting Financial Statement Analysis and Valuation a strategic perspective
ISBN: 978-1337614689
9th edition
Authors: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Posted Date:
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