Division A transfers a profitable subassembly to Division B, where it is assembled into a final product. A is located in a European country that has a high tax rate; B is located in an Asian country that has a low tax rate. Ideally, (1) what type of before-tax income should each division report from the transfer and (2) what type of transfer price should Division A set for the subassembly?
A) Choice A
B) Choice B
C) Choice C
D) Choice D
E) Choice E

Question

Division A transfers a profitable subassembly to Division B, where it is assembled into a final product. A is located in a European country that has a high tax rate; B is located in an Asian country that has a low tax rate. Ideally, (1) what type of before-tax income should each division report from the transfer and (2) what type of transfer price should Division A set for the subassembly? 
A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Quizplus · Accepted Answer

The Answer of Division A transfers a profitable subassembly to Division B, where it is assembled into a final product. A is located in a European country that has a high tax rate; B is located in an Asian country that has a low tax rate. Ideally, (1) what type of before-tax income should each division report from the transfer and (2) what type of transfer price should Division A set for the subassembly? 
A) Choice A 
B) Choice B 
C) Choice C 
D) Choice D 
E) Choice E

Division a Transfers a Profitable Subassembly to Division B, Where