=+19-33 KKK International transfer pricing, taxes, goal congruence OBJECTIVES 3, 4, 8 The Pluto Division of Romney Ltd is located in Australia. Its effective income tax rate is 30%. Another division of Romney Ltd, Nept, is located in New Zealand, where the income tax rate is 40%. The Nept Division manufactures, among other things, an intermediate product for the Pluto Division called IP-2007. The Nept Division operates at capacity and makes 15000 units of IP-2007 for the Pluto Division each period, at a variable cost of $60 per unit. Assume that there are no outside customers for IP-2007. Because the IP-2007 must be shipped from New Zealand to Australia, it costs the Nept Division an additional $4 per unit to ship the IP-2007 to the Pluto Division. There are no direct fixed costs for IP-2007. The Nept Division also manufactures other products.

A product similar to IP-2007 that the Pluto Division could use as a substitute is available in Australia for $75 per unit.

Required 1 What is the minimum and maximum transfer price that would be acceptable to the Pluto and Nept Divisions for IP-2007, and why?