Murray company produces telecommunications equipment A at its Toledo Division and can either exports the products to its Austria Division or sell them locally. Following details are given:

Var. cost per unit of A $

Full Mfg Cost per unit $at a production level of

Selling price in Austria $

Selling price in US $

Shipping costs to Austria incurred by Toledo Division $

Assume that there are no var. costs for Austria Division

Tax rate in the US

Tax rate in Austria

Transfer price allowed by authorities $ $

Production capacity at Toledo units

Max. Demand units in US and units in Austria

Assume no taxes and no restriction on transfer prices. Would you recommend exports to Austria? If so suggest a transfer price or a range on the exports to Austria.

Assume no taxes and no restriction on transfer prices. Calculate the income for Murray Company as a whole and for the individual divisions based on the transfer price in part

Now assume taxes and restriction on transfer prices. Under this scenario, is it worthwhile to export? If so at what transfer price would you export? Show income calculations for the company as a whole and for the individual divisions.

Are the transfer prices in parts and the same? If not, explain why.