Division A transfers a profitable subassembly to Division B, where it is assembled into a final product. A is located in a European country that has a high tax rate; B is located in an Asian country that has a low tax rate. Ideally, (1) what type of before-tax income should each division report from the transfer and (2) what type of transfer price should Division A set for the subassembly? Division A IncomeDivision B IncomeTransfer Price set by AA.LowLowLowB.LowHighLowC.LowHighHighD.HighLowHighE.HighHighLow
A. Choice A
B. Choice B
C. Choice C
D. Choice D
E. Choice E
Answer: B
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