Question: Suppose that the U. S. division could sell as many broadband routers as it makes at $ 450 per unit in the U. S. market,

Suppose that the U. S. division could sell as many broadband routers as it makes at $ 450 per unit in the U. S. market, net of all marketing and distribution costs.

Required

1. From the viewpoint of the Questron Company as a whole, would after- tax operating income be maximized if it sold the 100,000 routers in the United States or in Germany? Show your computations.

2. Suppose division managers act autonomously to maximize their division’s after- tax operating income. Will the transfer price calculated in requirement 2 in Exercise 15- 18 result in the U. S. division manager taking the actions determined to be optimal in requirement 1 of this exercise? Explain.

3. What is the minimum transfer price that the U. S. division manager would agree to? Does this transfer price result in the Questron Company as a whole paying more import duty and taxes than the answer to requirement 2 in Exercise 15- 18? If so, by how much?

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1 Aftertax operating income if Questron Company sells all 100000 broadband routers in the United States Revenues 450 x 100000 units 45000000 Full manufacturing costs 400 x 100000 units 40000000 Operat... View full answer

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