The Following Information Is Available for Company ABC -If the Transfer Price Is $8,000,what Is the Net Income

question 14

Multiple Choice

The following information is available for Company ABC.
(All amounts provided are in US dollars)
$\begin{array}{lll}&\text { Manufacturing Affiliate } & \text { Sales Affiliate } \\&\text { (Canada, income tax rate: } & \text { (United States, income } \\&40 \% \text { ) } & \text { tax rate: } 30 \% \text { ) }\\\text { Sales } & \_\_\_& \$ 10,000 \\\text { Cost of goods sold } & 5,000 &\_\_\_ \\\text { Operating expenses } & 1,000 & \$ 1,000\\ \text { Taxable income}\\ \text { Income taxes}\\ \text {Net income }\\\end{array}$
-If the transfer price is $8,000,what is the net income in Canada?

• A) $800
• B) $1,200
• C) $2,000
• D) $2,400

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Definitions:

Maintenance Costs

Expenses associated with the routine care and preservation of assets to keep them in operational condition.

Variable Operating Expense

Expenses that fluctuate in proportion to the amount of production or the volume of sales.

Sales Revenue

The income received from selling goods or services, which may include discounts and deductions for returned merchandise.

High-low Method

A method applied in cost accounting that calculates variable and fixed costs by analyzing the most and least active periods.