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Steve Corporation is a US corporation, and Kispert Corporation is a Chinese Corporation. The two corporations are owned by the same individual, a US citizen, and so they are related to one another. Steve Corp. manufactures chemicals that can be resold by Kispert Corp. in China. Steve Corp's cost of chemical production is $3.00 per gallon. Historically, it has earned a gross profit percentage of 13%, 26%, 67%, 89% and 9% on its sales to unrelated customers. Kispert Corporation's sales price on the chemicals in its market is $9.00 per gallon. Historically, it has earned a gross profit percentage of 12%, 21%, 71%, 16% and 92% on its sales to unrelated customers. Steve Corp's marginal tax rate is 30%, and Kispert's marginal tax rate is 21%. If the company uses the retail-price pricing method of determining the appropriate transfer price and wants to maximize after tax profits for their owner, what is the cost, rounded to the nearest penny, that Steve Corp. should charge Kispert for the chemicals?

Steve Corporation is a US corporation, and Kispert Corporation is a Chinese Corporation. The two corporations are owned by the same individual, a US citizen, and so they are related to one another. Steve Corp. manufactures chemicals that can be resold by Kispert Corp. in China. Steve Corp's cost of chemical production is $3.00 per gallon. Historically, it has earned a gross profit percentage of 13%, 26%, 67%, 89% and 9% on its sales to unrelated customers. Kispert Corporation's sales price on the chemicals in its market is $9.00 per gallon. Historically, it has earned a gross profit percentage of 12%, 21%, 71%, 16% and 92% on its sales to unrelated customers. Steve Corp's marginal tax rate is 30%, and Kispert's marginal tax rate is 21%. If the company uses the retail-price pricing method of determining the appropriate transfer price and wants to maximize after tax profits for their owner, what is the cost, rounded to the nearest penny, that Steve Corp. should charge Kispert for the chemicals?

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Steve Corporation is a US corporation, and Kispert Corporation is a Chinese Corporation. The two corporations are owned by the same individual, a US citizen, and so they are related to one another. Steve Corp. manufactures chemicals that can be resold by Kispert Corp. in China. Steve Corp's cost of chemical production is $3.00 per gallon. Historically, it has earned a gross profit percentage of 13%, 26%, 67%, 89% and 9% on its sales to unrelated customers. Kispert Corporation's sales price on the chemicals in its market is $9.00 per gallon. Historically, it has earned a gross profit percentage of 12%, 21%, 71%, 16% and 92% on its sales to unrelated customers. Steve Corp's marginal tax rate is 30%, and Kispert's marginal tax rate is 21%. If the company uses the retail-price pricing method of determining the appropriate transfer price and wants to maximize after tax profits for their owner, what is the cost, rounded to the nearest penny, that Steve Corp. should charge Kispert for the chemicals?
Transcribed Image Text:Steve Corporation is a US corporation, and Kispert Corporation is a Chinese Corporation. The two corporations are owned by the same individual, a US citizen, and so they are related to one another. Steve Corp. manufactures chemicals that can be resold by Kispert Corp. in China. Steve Corp's cost of chemical production is $3.00 per gallon. Historically, it has earned a gross profit percentage of 13%, 26%, 67%, 89% and 9% on its sales to unrelated customers. Kispert Corporation's sales price on the chemicals in its market is $9.00 per gallon. Historically, it has earned a gross profit percentage of 12%, 21%, 71%, 16% and 92% on its sales to unrelated customers. Steve Corp's marginal tax rate is 30%, and Kispert's marginal tax rate is 21%. If the company uses the retail-price pricing method of determining the appropriate transfer price and wants to maximize after tax profits for their owner, what is the cost, rounded to the nearest penny, that Steve Corp. should charge Kispert for the chemicals?
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