Global Enterprises, Inc. has production and marketing divisions throughout the world. One particular product is produced in Japan,
where the income tax rate is 30 percent, and transferred to a marketing division in Sweden, where the income tax rate is 60 percent. Assume that Sweden places an import tax of 10 percent on the product.
The variable cost of the product is $200 and the full cost is $400. Suppose the company can legally select a transfer price anywhere between the variable and full cost.
1. What transfer price should Global Enterprises use to minimize taxes?
Explain why this is the tax-minimizing transfer price.

2. Compute the amount of taxes saved by using the transfer price in requirement
| instead of the transfer price that would result in the highest taxes.