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Miggs Manufacturing Has One Plant Located in Belgium and Another

Question 57

Multiple Choice

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 maximum transfer price that the U.S. division would be willing to pay?
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 maximum transfer price that the U.S. division would be willing to pay? A) $70 B) $110 C) 4120 D) $200


A) $70
B) $110
C) 4120
D) $200

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