Multinational transfer pricing, global tax minimization. Express Grow Inc., based in Ankeny, lowa, sells high-end fertilizers. Express Grow has two divisions: - North Italy mining division, which mines potash in northern Italy - U.S. processing division, which uses potash in manufacturing top-grade fertilizer The processing division's yield is 50%: It takes 2 tons of raw potash to produce 1 ton of top-grade fertilizer. Although all of the mining division's output of 8,000 tons of potash is sent for processing in the United States, there is also an active market for potash in Italy. The foreign exchange rate is 0.80 Euro = $1 U.S. The fol- lowing information is known about the two divisions: Page Layout Data Home Insert Formulas Review A North Italy Mining Division 2 Variable cost per ton of raw potash 3 Fixed cost per ton of raw potash 4 Market price per ton of raw potash 5 Tax rate 56 EURO EURO 96 256 EURO 30% U.S. Processing Division 8 Variable cost per ton of fertilizer 9 Fixed cost per ton of fertilizer 10 Market price per lon of fertilizer 11 Тах rate 43 U.S. dollars U.S. dollars 1,190 US. dollars 115 35%

Multinational transfer pricing, global tax minimization. Express Grow Inc., based in Ankeny, lowa, sells high-end fertilizers. Express Grow has two divisions: - North Italy mining division, which mines potash in northern Italy - U.S. processing division, which uses potash in manufacturing top-grade fertilizer The processing division's yield is 50%: It takes 2 tons of raw potash to produce 1 ton of top-grade fertilizer. Although all of the mining division's output of 8,000 tons of potash is sent for processing in the United States, there is also an active market for potash in Italy. The foreign exchange rate is 0.80 Euro = $1 U.S. The fol- lowing information is known about the two divisions: Page Layout Data Home Insert Formulas Review A North Italy Mining Division 2 Variable cost per ton of raw potash 3 Fixed cost per ton of raw potash 4 Market price per ton of raw potash 5 Tax rate 56 EURO EURO 96 256 EURO 30% U.S. Processing Division 8 Variable cost per ton of fertilizer 9 Fixed cost per ton of fertilizer 10 Market price per lon of fertilizer 11 Тах rate 43 U.S. dollars U.S. dollars 1,190 US. dollars 115 35%

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing

Section: Chapter Questions

Problem 14E

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Multinational transfer pricing, global tax minimization. Express Grow Inc., based in Ankeny, Iowa, sells high-end fertilizers. Express Grow has two divisions:
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