Question

Varzesh is a sports equipment company with its corporate headquarters in country A and has three wholly owned subsidiaries in countries B, C and D.  The corporate income taxes are 21%, 25%, 29% and 22% for countries A, B, C, and D respectively. Varzesh is going to manufacture a new sports ball called Toop in, and only in, one of the three countries: B, C, or D. The manufacturing cost is $100, and it will be sold in equal quantities in all four countries for $370.  The transfer price for Toop is $320.  There are no other costs or revenues.

1. If Varzesh sells only one unit in each country, then what is the minimum total tax amount paid globally? Enter your answer rounded to the first decimal place.

2. If the transfer price is equal to $260, what is the minimum total tax amount paid globally if Varzesh sells only one unit in each country? Enter your answer rounded to the first decimal place.

Answer 1

New Microsoft Excel Worksheet - Excel ? A - X Sign in FORMULAS DATA REVIEW VIEW X 5 = FILE HOME INSERT PAGE LAYOUT % Cut Calibri -11 LE Copy Paste Format Painter Dainter B I U - - Clipboard Font Á A === On Ep Wrap Text General D X AutoSumĄ y # - A Merge & Center - $ % 4, 809 Conditional Format as Cell Formatting Table Styles Styles Insert Delete Format - Cells Clear Sort & Find & Filter - Select Editing Alignment Number E F G H I J K M N O P Q Total Tax Amount Total Tax Amount D 370.0 D 370.0 a. When the Transfer Price is $320 If Manufactures in Country B Particulars Selling Price Transfer Price Cost Net Profit (Selling Price + Transfer Price - Cos Tax Rate Tax Amount (Net Profit • Tax Rate) A 370.0 - 320.0 50.0 21% 10.5 B 370.0 960.0 400.0 930.0 25% 232.5 C 370.0 - 320.0 50.0 29% 14.5 b. When the Transfer Price is $260 If Manufactures in Country B Particulars Selling Price Transfer Price Cost Net Profit (Selling Price + Transfer Price - Cost) Tax Rate Tax Amount (Net Profit Tax Rate) 320.0 50.0 22% 11.0 A 370.0 - 320.0 50.0 21% 10.5 B 370.0 780.0 400.0 750.0 25% 187.5 C 370.0 - 320.0 50.0 29% 14.5 320.0 50.0 22% 11.0 268.5 223.5 Total Tax Amount Total Tax Amount B 370.0 C 370.0 D 370.0 If Manufactures in Country C Particulars Selling Price Transfer Price Cost Net Profit (Selling Price + Transfer Price - Cos Tax Rate Tax Amount (Net Profit • Tax Rate) A 370.0 - 320.0 50.0 21% 10.5 If Manufactures in Country C Particulars Selling Price Transfer Price Cost Net Profit (Selling Price + Transfer Price - Cost) Tax Rate Tax Amount (Net Profit * Tax Rate) 320.0 50.0 25% 12.5 400.0 930.0 29% 269.7 320.0 50.0 22% 11. A 370.0 - 320.0 50.0 21% 10.5 B 370.0 . 320.0 50.0 25% 12.5 C 370.0 780.0 400.0 750.0 29% 217.5 D 370.0 - 320.0 50.0 22% 11.0 0 3 03.7 251.5 Total Tax Amount B 370.0 C 370.0 B 370.0 C 370.0 If Manufactures in Country D Particulars Selling Price Transfer Price Cost Net Profit (Selling Price + Transfer Price - Co Tax Rate Tax Amount (Net Profit • Tax Rate) A 370.0 - 320.0 50.0 21% 10.5 If Manufactures in Country D Particulars Selling Price Transfer Price Cost Net Profit (Selling Price + Transfer Price - Cost) Tax Rate Tax Amount (Net Profit • Tax Rate) 320.0 50.0 25% 12.5 D Total Tax Amount 370.0 960.0 400.0 930.0 | _ 22% 204.6 242.1 320.0 50.0 29% 14.5 A 370.0 - 320.0 50.0 21% 10.5 320.0 50.0 25% 12.5 320.0 50.0 29% 14.5 D 370.0 780.0 400.0 750.0 22% 165.0 L 202.5 || - ... Sheet6 Sheet? Sheet8 Sheet2 Sheet10 Sheet11 Sheet12 Sheet13 Sheet14 READY U - 190 x] + 80% 08:56 04-May-202 ^ ¢31)

Answer:

1. if Transfer Price is $320 then Minimum Tax Amount is $242.1

2. if Transfer Price is $260 then Minimum Tax Amount is $202.5

Refer above working, couldnt upload excel.