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The Quest Company manufactures telecommunications equipment at its plant in Scranton, Pennsylvania. The company has marketing divisions throughout the world. A Quest marketing division in
The Quest Company manufactures telecommunications equipment at its plant in Scranton, Pennsylvania. The company has marketing divisions throughout the world. A Quest marketing division in Hamburg, Germany, imports 130,000 broadband routers from the United States. The information about the router is available in the accompanying table. (Click the icon for the router information.) Suppose the United States and German tax authorities only allow transfer prices that are between the full manufacturing cost per unit of $415 and a market price of $490, based on comparable imports into Germany. The German import duty is charged on the price at which the product is transferred into Germany. Any import duty paid to the German authorities is a deductible expense for calculating German income taxes. Requirement 1a. Calculate the after-tax operating income earned by the United States and German divisions from transferring 130,000 broadband routers at full manufacturing cost per unit. (Income taxes are not included in the computation of the cost-based transfer prices.) (Round your final answer to the nearest whole dollar. Use parentheses or a minus sign for a negative value.) The after-tax operating income earned by the United States and German divisions from transferring the broadband routers using the full manufacturing cost per unit is $. Required 1. Calculate the after-tax operating income earned by the United States and German divisions from transferring 130,000 broadband routers (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.) 2. Which transfer price should the Quest 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 $415 and the market price of $490 of comparable imports into Germany. Explain your reasoning
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