1. Set up an EXCEL table with the information below. Assess the transfer price information in Table 1. Use Excel formulas and cell references to calculate all entries with question marks (do not enter any numbers in cells with ?). Use of proper formulas is required.
2. At what transfer price should the U.S. company sell the product to its Chinese subsidiary? Explain your answer.

A U.S.-based Levi Strauss parent company is selling a pair of jeans to its Chinese subsidiary Levi Strauss retail store. Assume that the retail selling price in China is the same in scenarios A and B. Also, the cost to manufacture the jeans in the U.S. remains the same across the scenarios. Table 1: Transfer Pricing Scenarios: Scenario A Scenario B USA China USA China $40.00 $70.00 $55.00 ? Transfer Price/Selling Price Transfer Price/Selling Price Cost of Product $25.00 ? Cost of Product ? ? Gross Profit ? ? Gross Profit ? ? Tax Rate 21% 25% Tax Rate 21% 25% Tax Due ? ? Tax Due ? ? Combined Tax ? Combined Tax ? Due Due Combined Net ? ? Combined Net Profit Profit