Question: Suppose that the U.S. division could sell as many chainsaws as it makes at $225 per unit in the U.S. market, net of all marketing

Suppose that the U.S. division could sell as many chainsaws as it makes at $225 per unit in the U.S. market, net of all marketing and distribution costs.

Required

1. From the viewpoint of the Burton Company as a whole, would after-tax operating income be maximized if it sold the 200,000 chainsaws in the United States or in France? 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 22-22 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 Burton Company as a whole paying more import duty and taxes than the answer to requirement 2 in Exercise 22-22? If so, by how much?

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1 Aftertax operating income if Burton Company sells all 200000 chainsaws in the United States Revenues 225 200000 units 45000000 Full manufacturing costs 175 200000 units 35000000 Operating income 100... View full answer

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