1.Calculate the after-tax operating profit earned by the Australian and US divisions from transferring 10 000 units of product B12: (a) at full manufacturing cost per unit and (b) at market price of comparable imports. (Income taxes are not included in the calculation of the cost-based transfer prices.)
2.Which transfer price should Derwent Ltd select to minimise the total of company import duties and income taxes? Remember that the transfer price must be between the full manufacturing cost per unit of $800 and the market price of $950 of comparable imports into the USA. Explain your reasoning.