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Fjord Inc. has several plants located around the world. The plant in Norway manufacturers a component that is used in a product manufactured by one of the U.S. plants. The Norway plant has excess capacity. The current tax rate in Norway is 40%, while the U.S. corporate tax rate is 30%.
-What is the transfer price that would be the best for Fjord Inc.
A) $ 150.00
B) $ 59.00
C) $ 94.00
D) $102.00

Question

Quizplus · Accepted Answer

The best transfer price for Fjord Inc. would be the one that minimizes the overall tax burden. Since the tax rate in Norway is higher than in the U.S., Fjord Inc. should aim to report more profit in the U.S. by setting a lower transfer price. $59.00 is the lowest transfer price, which would help achieve this goal.

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