ABCO Corporation Has a Parts Division in Country A

question 31

Multiple Choice

ABCO Corporation has a parts division in country A. Its assembly division is in country B,which has a higher tax rate than country A. To minimize the corporation's overall income tax,how should ABCO set its transfer prices between its parts and assembly divisions?

• A)The parts division should sell parts to the assembly division at low prices.
• B)The parts division should sell parts to the assembly division at high prices.
• C)It doesn't matter what transfer price is used because the divisions are part of the same company.
• D)Transfer pricing has nothing to do with the total tax paid by the corporation.

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