Bobo, Inc. manufactures small motors used in refrigerators, washing machines, and other household appliances in JuJu division. JuJu division is located in a country with a 30% income tax rate. JuJu transfers the motors to LaSalle division which is located in a country with a 40% income tax rate. The variable cost per motor is $560 and LaSalle sells each motor for $960. Bobo, Inc.s full cost per motor is $800. Should the transfer be priced at variable cost or full cost, and why?

• Variable cost because total firm net income is $400

• Variable cost because total firm taxes will be minimized

• Full cost because it leads to accurate measures of local performance by JuJu

• Full cost because total firm net income is higher by $24 per motor

• Either price will result in the same total net income for Bobo, Inc.