Graphic Art, Inc. has a print division that produces art prints in China and a Retail Division in Greece that sells the prints. The Print Division has a low 20% income tax rate and the Retail Division has a high 50% income tax rate. The Retail Division in Greece is subject to a 10% import duty on the transfer price of all imported products. Both China and Greece allow firms to use either variable or full cost as the transfer price. The Graphic Art document summarizes both transfer pricing methods.
Assuming both divisions have significant positive taxable income, write a business email that describes the transfer pricing method that you think Graphic Art, Inc. should use. Be sure to cite the data from the spreadsheet. (2 – 3 paragraphs)