Analyze the effect of both full-cost and variable-cost transfer pricing methods on cash flows using a spreadsheet program such as Excel.
Listed below is to used for calculations for the excel part . Also the template is in the attachment to fill out for excel.
Robo-Control Technologies Inc. manufactures robotic controllers in Division A, a country with a 30% income tax rate, and transfers them to Division B, a country with a 40% income tax. An import duty of 15% of the transfer price is paid on all imported products. The import duty is not deductible in computing taxable income. The controller’s full cost is $1,500 and variable cost is $1,000; they are sold by Division B for $2,000. The tax authorities in both countries allow firms to use either variable cost or full cost as the transfer price.
Part 1: Analyze the effect of both full-cost and variable-cost transfer pricing methods on cash flows using a spreadsheet program such as Excel.
- Part 2: Make your recommendation as to how the organization should proceed, being sure to justify your recommendation with examples form this week’s Resources, and/or additional research. Complete this aspect of the Assignment by using a word processing program such as Word.
Template
| Week 4 Application | |||||||
| Full Cost | Variable Cost | ||||||
| Division A Taxes: | |||||||
| Transfer Price | |||||||
| Less Cost (subtract) | |||||||
| Taxable Income | 0 | ||||||
| Taxes in Low Country (or refund) | |||||||
| Division B Taxes: | |||||||
| Sales Price | |||||||
| Less Transfer Price (subtract) | |||||||
| Income Taxes | |||||||
| Import Duty | |||||||
| Taxes in High Country (or refund) | |||||||
| Total Taxes |
1. Student uses MS Excel to calculate income tax expense or refund, taxable income, and total taxes using the full-cost method for transfer pricing. There are no errors.
2. Student uses MS Excel to calculate income tax expense or refund, taxable income, and total taxes using the variable-cost method for transfer pricing. There are no errors.
3. Student produces a thorough and detailed Word document that incorporates specific details from the MS Excel spreadsheet, a detailed recommendation based on those specific details as to how the organization should proceed is included, and the recommendation is justified with at least 3 examples from the week’s resources and/or additional research in the Walden Library.
4. Writing exhibits strong evidence of thoughtful critical analysis and thinking; careful examination is made of assumptions and possible biases, with detailed supporting rationale. Writing synthesizes the classroom experiences and content; analyzes patterns or connections between theory and practice; and draws logical conclusions based on well-reasoned arguments. New questions are presented based on synthesis of ideas and input.
5. Writing is clear, logical, well-organized and appropriate. Work is free from spelling and grammar/syntax errors. Tone is professional and free from bias (i.e., sexism, racism). There are no errors.
6. Student effectively and directly integrates discussion/assignment content with relevant and compelling personal experiences, additional research, or current events from credible news sources. Specifically adds a new and/or different insight or perspective on the subject area(s) being discussed or treated in the assignment.
7. Student demonstrates full adherence to scholarly or credible reference requirements and adheres to APA style with respect to source attribution and references. There are no APA errors.