A division of Sarge Company is located in a country that places restrictions on the amount of funds that may be paid as dividends to foreign owners. If Sarge Company wishes to maximize the amount of cash received from the foreign division, Sarge Company should:
A) establish a low transfer price of goods transferred into the country
B) establish a high transfer price of goods transferred out of the country
C) establish a high transfer price of goods transferred into the country
D) establish a low transfer price of goods transferred out of the country

Question

Quizplus · Accepted Answer

By establishing a high transfer price of goods transferred into the country, Sarge Company can effectively move more funds out of the foreign division, bypassing the dividend restrictions.

A Division of Sarge Company Is Located in a Country