Affiliate A sells 5,000 units to Affiliate B per year. The marginal income tax rate...
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Accounting
Affiliate A sells 5,000 units to Affiliate B per year. The marginal income tax rate for Affiliate A is 25% and the marginal income tax rate for Affiliate B is 40%. Additionally, Affiliate B pays a tax-deductible tariff of 5% on imported merchandise. The transfer price per unit is currently $2000, but it can be set at any level between $2000 and $2400. Determine the optimal transfer price and how much that saves per year.
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