Zen Manufacturing Inc. is a multinational firm with sales and manufacturing units in 15 countries. One of its manufacturing units, in country X, sells its product to a retail unit in country Y for $316,000. The unit in country X has manufacturing costs of $160,000 for these products. The retail unit in country Y sells the product to final customers for $460,000. Zen is considering adjusting its transfer prices to reduce overall corporate tax liability.

Required:

1. Assume that both country X and country Y have corporate income tax rates of 40% and that no special tax treaties or benefits apply to Zen. What would be the effect on Zens total tax burden if the manufacturing unit raises its price from $316,000 to $379,200?

2. What would be the effect on Zens total taxes if the manufacturing unit raised its price from $316,000 to $379,200 and the tax rates in countries X and Y are 20% and 40%, respectively?

(For all requirements, leave no cell blank; if there is no effect enter "0" and select "No effect" from dropdown.)

(For all requirements, leave no cell blank; if there is no effect enter "O" and select "No effect" from dropdown.) \begin{tabular}{|l|l:l:|} \hline 1. Effect on Zen's total tax when tax rates are same in both the countries & No effect \\ \hline 2. & Effect on Zen's total tax when tax rates are different in countries X and Y \\ \hline \end{tabular}