pfizer is purchasing liptor from its drug manufacturing plant in switzerland. Th

Question

pfizer is purchasing liptor from its drug manufacturing plant in switzerland. The u.s. CORPORATE income tax is 35%, while switzerland's is 15%. The variable cost of manufacturing is $0.35 per 20 mg dose, the wholesale price to U.S. based drugstores is $2 per 20 mg dose and the U.S. retail price is $4 per 20 mg dose. What price should pfizer U.S. pay to its swiss subsidairy for its next order of liptor? explain your reasoning. what is the term we apply to the price at which pfizer purchases the liptor from liptor (CH).

Explanation / Answer

Pfizer should pay $2 per 20mg dose to it subsidiary for purchases. Ar per transfer pricing, the arm's legnth price for purchases from subsidiary is the market value of the product. Here, the market value shall be wholesale price becuase pfizer is purchaisng the produc for wholesale puprose only. The term is called arm's lenth price.

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