define the term tranfer price. why transfer price is strategically important to the organisation?

9.34 Transfer Pricing; International Taxation Crain Company has,., manufacturing subsidiary in Singapore that produces high-end exercise equipment for U.S. consumers. The manufacturing subsdiary has total manufacturing costs of $1,500,000, plus general and administrative expenses of $350,000. The manufacturing unit sells the equipment for $2,500,000 to the U.S. marketing subsidiary. which sells it to the final consumer for an aggregate of $3,500,000. The sales subsidiary has total marketing, general, and administrative costs of $200,000. Assume that Singapore has a corporate tax rate of 17% and that the U.S. tax rate is 21%. Assume that no tax treaties or other special tax treatments apply. Required What is the effect on Crain Company's total corporate-level taxes if the manufacturing subsidiary raises its price to the sales subsidiary by 20% ? Operating leverage. Cover Rugs is holding a 2-week carpet sale at Josh's Club, a local warehouse store. Cover Rugs plans to sell carpets for $950 each. The company will purchase the carpets from a local distributor for $760 each, with the privilege of returning any unsold units for a full refund Josh's Club has offered Cover Rugs two payment alternatives for the use of space. - Option 1: A fixed payment of $7.410 for the sale period - Option 2:10\% of total revenses eamed during the sale period Assume Cover Rugs will incur no other costs. Required: 1. Calculate the breakeven point in units for (a) Option 1 and (b) Option 2. 2. At what level of revenues will Cover Rugs eam the same operating income under either option? a. For what range of unit sales will Cover Rugs prefer Option 1 ? b. For what range of unit sales will Cover Rugs prefer Option 2? 3. Calculate the degree of operating leverage at sales of 65 units for the two rental options. 4. Briefly explain and interpret your answer to requirement 3