Figure 20-10
Gregg Manufacturing Has One Plant Located in Belgium

question 25

Multiple Choice

Figure 20-10
Gregg Manufacturing has one plant located in Belgium and another plant located in the United States. The Belgium plant manufactures a component used in a finished product manufactured at the U.S. plant. Currently, the Belgium plant is operating at 70 per cent capacity. In Belgium, the income tax rate is 30 per cent; in the United States, the corporate income tax rate is 35 per cent.
The market price of the component is £280 and the Belgium plant's costs to manufacture the component are as follows: $\begin{array}{lr}\text { Direct materials } & £ 30 \\\text { Direct labour } & 50 \\\text { Variable overhead } & 12 \\\text { Fixed overhead } & 56\end{array}$
-Refer to Figure 20-10. What is the maximum transfer price that the U.S. division would be willing to pay?

• A)£280
• B)£148
• C)£136
• D)£92

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