The Blackridge Company manufactures chainsaws at its plant in Sandusky, Ohio. The company has marketing divisions throughout the world. A Blackridge marketing division in Lille, France, imports 200,000 chainsaws annually from the United States. The following information is available: (Click the icon to view the information.) (Click to view additional information.) Read the requirements. Requirement 1. Calculate the after-tax operating income earned by the United States and French divisions from transferring 200,000 chainsaws (a) at full manufacturing cost per unit and (b) at market price of comparable imports. (Income taxes are not included in the computation of the cost-based transfer prices.) Begin by calculating the after-tax operating income earned by the United States division from transferring 200,000 chain saws (a) at full manufacturing cost per unit. (Complete all input Data Table United States division: 39,000,000 Revenues Costs 40% 45% 39,000,000 20% Full manufacturing cost Division operating income Division income taxes 0 U.S income tax rate on the U.S. division's operating income French income tax rate on the French division's operating income French import duty Variable manufacturing cost per chainsaw Full manufacturing cost per chainsaw Selling price (net of marketing and distribution costs) in France $ 140 $ Division after-tax operating income 195 300 $ Next, calculate the after-tax operating income earned by the French division from transferring 200,000 chain saws (a) at full manufacturing cost per unit. (Do not round intermediary cal Print Done Requirements French division: Revenues Costs Transferred-in costs More Info Import duties Total division costs Division operating income Division income taxes 1. Calculate the after-tax operating income earned by the United States and French divisions from transferring 200,000 chainsaws (a) at full manufacturir cost per unit and (b) at market price of comparable imports. (Income taxes are not included in the computation of the cost-based transfer prices.) 2. Which transfer price should the Blackridge Company select to minimize the total of company import duties and income taxes? Remember that the transfer price must be between the full manufacturing cost per unit of $195 and the market price of $250 of comparable imports into France. Explain your reasoning Suppose the United States and French tax authorities only allow transfer prices that are between the full manufacturing cost per unit of $195 and a market price of $250, based on comparable imports into France. The French import duty is charged on the price at which the product is transferred into France. Any import duty paid to the French authorities is a deductible expense for calculating French income taxes. Division after-tax operating income
