Exercise Algo International Transfer Prices: Ethical Issues LO
Whitehill Chemicals has two operating divisions. Its Formulation Division in the United States mixes, processes, and tests basic
chemicals, and then ships them to Ireland, where the company's Commercial Division uses the chemicals to produce and sell
various products. Operating expenses amount to $ million in the US and $ million in Ireland exclusive of the costs of any
goods transferred from the US Revenues in Ireland are $ million.
If the chemicals were purchased from one of the company's Irish mixing divisions, the costs would be $ million. However, if it
had been purchased from an independent US supplier, the cost would be $ million. The marginal income tax rate is
percent in the US and percent in Ireland.
Required:
What is the company's total tax liability to both jurisdictions for each of the two alternative transfer pricing scenarios $ million
and $ million
Note: Enter your answers in dollars and not in millions of dollars.
Answer is complete but not entirely correct.
