Transfer Prices and Tax Regulations: Exlm. Inc., has two operating divisions in a semiautonomous organization structure. Division Ex is located in the United States. It produces a part labeled XZ-I. which is an input to division Im, which is located in the south of France. Division Ex has idle capacity that it used to produce XZ-1. The market price of XZ-1 domestically is $60. The variable costs are $25 per unit. The company's U.S. tax rate is 40 percent of income. After paying the transfer price for each XZ-1 received from division Ex. division Im also pays a shipping fee of $15 per unit. Part XZ-I becomes a part of division Im's output product. The output product costs an additional $10 to produce and sells for an equivalent $115. Division Im could purchase part XZ-1 from a Paris supplier at a cost of $50 per unit. The company's French tax rate is 70 percent of income. Assume French tax laws permit transferring at either variable cost or market price. Assume the U.S. division's income is taxed at 40 percent.

Required:

What transfer price is economically optimal for Exim, Inc.? Show computations.