Alberta’s Boot Division is located in a country with a corporate tax rate of 10%, and the Sole Division is located in a country with a tax rate of 30%. The following illustrates the after tax contribution margin per unit under alternative transfer prices $18 and $11.
|
Boot Division |
Sole Division |
||
|
Selling price of hiking boots |
$90 |
Selling price of sole |
$18 |
|
Variable cost of manufacturing boot(not including sole) |
35 |
Variable cost per sole |
11 |
|
Cost of sole purchased internally |
18 |
|
|
Why do the after tax contribution margins differ?