If a corporation operates two divisions that supply one another,and each division is located in a different country,then transfer prices are:
A)set to allocate profit to the low tax rate country.
B)set to allocate all costs to the low tax rate country.
C)set to allocate profit to the high tax rate country.
D)not allowed between most countries.

Question

Quizplus · Accepted Answer

Transfer prices can be set to allocate profit to the low tax rate country as a strategy to minimize the overall tax burden of the corporation. This is because by allocating more profit to the division in the lower tax rate country, the corporation can reduce the amount of taxes it pays on those profits.

If a Corporation Operates Two Divisions That Supply One Another,and