Aye Co., which produces electronic equipment in its Country A subsidiary, has a very strong local market for its products. The variable production cost per unit is $260, and the subsidiary can sell its entire supply domestically at the price of $340. Country A's tax rate is at 40%. Alternatively, Aye Co. can ship these items to its subsidiary located in Country B, to be packaged with another product that the Country B subsidiary will distribute nationwide. Information about the Country B's bundled product and the subsidiary's operating environment are as follows: You can assume that Country A and B's tax authorities allow for a transfer price for the electronic equipment to be set at either: (i) Country A subsidiary's variable manufacturing cost; or (ii) Country A subsidiary's market price. Aye Co.'s top management is in the process of exploring a suitable transfer pricing policy for the company as a whole. Question 2a Based on available information, compute the Aye Co.'s overall profitability per unit if the internal transfer is made at: (i) Country A subsidiary's variable manufacturing cost; and (ii) Country A subsidiary's market price. Show your computations for Country A and B's operations separately. Advice, with clear explanations, Aye Co. on their transfer pricing policy. A domestic external supplier has approached Country B's subsidiary to supply similar electronic equipment for $310 per unit. Evaluate the decision of whether to transfer the equipment from Country A or purchase from external supplier from the perspectives of: (i) The manager of Country B's subsidiary; and (ii) The top management of Aye Co. Advice Aye Co. on their corporate policies with respect to internal transfers. Aye Co., which produces electronic equipment in its Country A subsidiary, has a very strong local market for its products. The variable production cost per unit is $260, and the subsidiary can sell its entire supply domestically at the price of $340. Country A's tax rate is at 40%. Alternatively, Aye Co. can ship these items to its subsidiary located in Country B, to be packaged with another product that the Country B subsidiary will distribute nationwide. Information about the Country B's bundled product and the subsidiary's operating environment are as follows: You can assume that Country A and B's tax authorities allow for a transfer price for the electronic equipment to be set at either: (i) Country A subsidiary's variable manufacturing cost; or (ii) Country A subsidiary's market price. Aye Co.'s top management is in the process of exploring a suitable transfer pricing policy for the company as a whole. Question 2a Based on available information, compute the Aye Co.'s overall profitability per unit if the internal transfer is made at: (i) Country A subsidiary's variable manufacturing cost; and (ii) Country A subsidiary's market price. Show your computations for Country A and B's operations separately. Advice, with clear explanations, Aye Co. on their transfer pricing policy. A domestic external supplier has approached Country B's subsidiary to supply similar electronic equipment for $310 per unit. Evaluate the decision of whether to transfer the equipment from Country A or purchase from external supplier from the perspectives of: (i) The manager of Country B's subsidiary; and (ii) The top management of Aye Co. Advice Aye Co. on their corporate policies with respect to internal transfers