Question
Atascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them
Atascadero Industries operates a Manufacturing Division and a Marketing Division. Both divisions are evaluated as profit centers. Marketing buys products from Manufacturing and packages them for sale. Manufacturing sells many components to third parties in addition to Marketing. Selected data from the two operations follow: Manufacturing Marketing Capacity (units) 1,000,000 500,000 Sales pricea $ 1,400 $ 4,550 Variable costsb $ 560 $ 1,680 Fixed costs $ 10,000,000 $ 7,200,000 a For Manufacturing, this is the price to third parties. b For Marketing, this does not include the transfer price paid to Manufacturing. Suppose Manufacturing is located in Country X with a tax rate of 65 percent and Marketing in Country Y with a tax rate of 35 percent. All other facts remain the same.
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