Miggs Manufacturing Has One Plant Located in Belgium and Another

Miggs Manufacturing has one plant located in Belgium and another plant located in the United States. The Belgium plant manufactures a component used in a finished product manufactured at the U.S. plant. Currently, the Belgium plant is operating at 70 percent capacity. In Belgium, the income tax rate is 42 percent; in the United States, the corporate income tax rate is 35 percent. The market price of the component is $200 and the Belgium plant's costs to manufacture the component are as follows:
What is the minimum transfer price that the Belgium division would be willing to accept?

A) $70
B) $110
C) $120
D) $200

Correct Answer:

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