Interglobal Company has two operating divisions in a semiautonomous organization structure. Division +, anster Picesanctter X, located in the United States, produces part XZ-1, which is an input to division Y, located in the south Regulations of France. Division X uses idle capacity to produce XZ-1, which has a domestic market price of $60. Its (LO 1,4)

variable costs are $25 per unit. The company’s US tax rate is 40 percent of income. .

In addition to the transfer price for each XZ-1 received from division X, division Y pays a $15 sate shipping fee per unit. Part XZ-1 becomes a part of division Y’s output product. The output product costs q an additional $10 to produce and sells for an equivalent $115. Division Y could purchase part XZ-1 for

$50 per unit from a Paris supplier. The company’s French tax rate is 70 percent of income. Assume that French tax laws permit transferring at either variable cost or market price.

Required What transfer price is economically optimal for Interglobal Company? Support your answer with an appropriate analysis.