Question Details

1.	If a company has a plant in a high tax jurisdiction that produces products for a facility in a low tax jurisdiction - suggest a strategy that will result in the lowest tax for the overall corporation.

2.	The Micro Division of Silicon Computers produces computer chips that are sold to the Personal Computer Division and to outsiders.  Operating data for the Micro Division for 20x3 are as follows:

	
	Internal Sales	External Sales
Sales:		
     300,000 chips at $10	$3,000,000	
     200,000 chips at $12		$2,400,000
Variable expenses at $4	1,200,000	    800,000
Contribution margin	$1,800,000	$1,600,000
Fixed cost (allocated in units)	1,500,000	1,000,000
Operating income	$   300,000	$   600,000

	The Personal Computer Division has just received an offer from an outside supplier to furnish chips at $8.60 each.  The manager of Micro Division is not willing to meet the $8.60 price.  She argues that it costs her $9.00 to produce and sell each chip.  Sales to outside customers are at a maximum of 200,000 chips.
	
	Required:

	a.	Verify the Micro Division's $9.00 unit cost figure.

	b.	Should the Micro Division meet the outside price of $8.60? Explain.

	c.	Could the $8.60 price be met and still show a profit for the Micro Division sales to the Personal Computer Division?  Show computations.





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