What is the minimum transfer price

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Question - 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 per cent capacity. In Belgium, the income tax rate is 42 per cent; in the United States, the corporate income tax rate is 35 per cent.

The market price of the component is £200 and the Belgium plant's costs to manufacture the component are as follows:

Direct materials £20

Direct labour 40

Variable overhead 10

Fixed overhead 30

Required - What is the minimum transfer price that the Belgium division would be willing to accept?

Reference no: EM133185711

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