Making recommendations as to how your organization should structure its transfer pricing.

As a manager, you may be
tasked with mM This is especially true in cases when both variable or
full cost transfer pricing is acceptable, and the choice is not obvious.
For this Assignment,
take a moment to review your course text. Reflect on the scenario presented and
consider how transfer pricing decisions might apply to organizational decision
making.
Phipps
manufactures circuit boards in Division A, a country with a 30% income tax
rate, and transfers them to Division B, a country with a 40% income tax. An
import duty of 15% of the transfer price is paid on all imported products. The
import duty is not deductible in computing taxable income. The circuit boards’
full cost is $1,000 and variable cost is $700; they are sold by Division B for
$1,200. The tax authorities in both countries allow firms to use either
variable cost or full cost as the transfer price.
The
Assignment:

Part 1:Analyze the effect of
both full-cost and variable-cost transfer pricing methods on Phipps cash flows
using a spreadsheet program such as Excel.

Part 2:Make your
recommendation as to how the organization should proceed, being sure to justify
your recommendation with examples form this weeks resources, and/or additional
research. Complete this aspect of the Assignment by using a word processing
program such as Word.
Attachments: