Suggested Sites Imported From IE U Second Semester Reading Question 18 (12 marks) Mark to review this question at the end of the em TeckCorp Inc. (TCI) is a technology company located in the United States. TCI has several subsidiaries, including Can Teck Ltd, which is located in Canada, and Bermuleck, which is located in Bermuda Bermuda has very favourable tax laws. Both Can Teck and Bermu Teck are considered profit centres. Can Teck manufactures components used by Bermu Teck and sells all its production to Bermu Teck. The controller has established the transfer price at $135 per component, though Can Teck could sell the same units on the external market for $175 each. a. Briefly explain why TCI would fix a transfer price below the market value? What are the advantages for the company as a whole? (4 marks) b. Explain the consequences of the transfer pricing policy on each subsidiary (CanTeck and BermuTeck). What changes, if any, could be made to rectify inequaties between subsidiaries? (4 marks) e. Briefly describe two other transfer pricing methods that could be used in this situation. (4 marks) Font Size B Press ALT for het Back Net Save History Save Version 8:19 PM ENG ef/studentexam.xsp# If you require assistance contact the Student Support Centre at 1-800-468-6531 Suggested Sites Imported From IE U Second Semester Reading Question 18 (12 marks) Mark to review this question at the end of the em TeckCorp Inc. (TCI) is a technology company located in the United States. TCI has several subsidiaries, including Can Teck Ltd, which is located in Canada, and Bermuleck, which is located in Bermuda Bermuda has very favourable tax laws. Both Can Teck and Bermu Teck are considered profit centres. Can Teck manufactures components used by Bermu Teck and sells all its production to Bermu Teck. The controller has established the transfer price at $135 per component, though Can Teck could sell the same units on the external market for $175 each. a. Briefly explain why TCI would fix a transfer price below the market value? What are the advantages for the company as a whole? (4 marks) b. Explain the consequences of the transfer pricing policy on each subsidiary (CanTeck and BermuTeck). What changes, if any, could be made to rectify inequaties between subsidiaries? (4 marks) e. Briefly describe two other transfer pricing methods that could be used in this situation. (4 marks) Font Size B Press ALT for het Back Net Save History Save Version 8:19 PM ENG ef/studentexam.xsp# If you require assistance contact the Student Support Centre at 1-800-468-6531
