Melon Computer Company Manufacturers Its Computer Components in Singapore and Assembles

question 102

Multiple Choice

Melon Computer Company manufacturers its computer components in Singapore and assembles the computers intended for sale in North America in its plant in Arizona. If the U.S. reduces the corporate income tax rate next year, what is the likely outcome for Melon Computer Company?

• A) Reduce the transfer price for computer components and increase downstream profits
• B) Reduce the transfer price for computer components and decrease downstream profits
• C) Increase the transfer price for computer components and increase downstream profits
• D) Increase the transfer price for computer components and decrease downstream profits

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Definitions:

Financial Statement

A formal record of the financial activities and position of a business, person, or other entity, typically including the balance sheet, income statement, and cash flow statement.

Favorable Trend

A pattern or movement in financial or operational data that suggests positive performance or outcomes for a business.

Book Value

The net value of a company's assets found on its balance sheet, and is calculated by subtracting liabilities from the total assets.

Machinery

Equipment, especially those powered by fuel or electricity, used in the industrial production or manufacturing process.