1. International Manufacturing has two divisions. Division A, which manufactures goods that are transferred to Division B, is located in Bulgaria, which has a corporate tax rate of 10%. Division B is located in the United States, where International falls into the 30% tax bracket. Determine whether the company would prefer a high or a low transfer price.
2. Pillsur Corporation manufactures parts in its Australia division, which is subject to a 30% tax rate. The parts are transferred to the Egypt division for assembly and sale. The tax rate in Egyptis 20%. Determine whether the company would prefer a high or a low transfer price.
