MBS is organized into two divisions-Fabrication and Marketing. Fabrication produces a product that can be sold immediately or transferrred to Marketing for customization and then sold. Marketing only buys from fabrication for quality control reasons.

Fabrication currently sells 20,000 units annually at a price of $200 per unit to outside customers. It sells an additional 10,000 units to Marketing. Yhe unit variable cost in Fabrication is $100 and annual fixed costs are $1.0 million. Fabrication is located in a country with a 30% tax rate.

Marketing can sell customized units for $400 each. In addition to what it pays Fabrication, the variable costs in Marketing ar $50 per unit. Annual fixed costs in Marketing ar 1.2 million. Markewting is located in a country with a 20% tax rate.

1. Suppose Farication would have excess capacity even with the demand from karketing. Ignoring tax implications, what transfer price would recommend MBS adopt? I answered $100
2. What would be the total taxes MBS paid under the policy you recommend in requirement A. I could not figure this out. I need to have the math done step by step to see where I went wrong.
3. Suppose the fabrication has no excess capacity. Ignoring tax implications, what transfer price would you recommend MBS adopt? I put $200
4. What would be the total taxes MBS paid under the policy you recommend in Requirement C. Again, I need a step by step guide with the math to see where I went wrong.
5. We are supposed to place the answers in dollars and not millions of dollars.