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What would be the lowest acceptable transfer price

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Question - SEMO Inc. has a division located in Spain and another in the U.S. The Spanish division produces a part needed for the product made by the U.S. division. There is substantial excess capacity in the Spanish division. The tax rate of the Spanish division is 35% and U.S. division tax rate is 30%.

The part sells externally for P75 and the Spanish division's manufacturing costs are:

Direct material P32

Direct labor 12

Variable overhead 6

Fixed overhead 19

Required -

1) What would be the lowest acceptable transfer price for the Spanish division?

2) What would be the highest acceptable transfer price for the U.S. division?

Reference no: EM133188094

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