Question
WT transferred 11,000 units of product A from its manufacturing division in AFRICA to its selling division in the ASIA during the year just ended.
WT transferred 11,000 units of product A from its manufacturing division in AFRICA to its selling division in the ASIA during the year just ended. The manufacturing cost of each unit of product A was $120 (75% of which was variable cost). The market price for each unit of product A in AFRICA was $300. The AFRICA divisions profit after tax for its sales to the ASIA division for the year ended was $1,100,000. The ASIA division incurred marketing and distribution costs of 40 for each unit of product A and sold the product for 250 a unit. The ASIA tax rate was 25%. (Exchange rate: 1 = $1.50) If the transfers had been made at variable cost, the advantage/(disadvantage) (as compared to market price TP) to WT Globes as a whole would have been:
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