Free IIA-CIA-PART4 Exam Braindumps (page: 7)

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A firm ships its product to a foreign subsidiary and charges a price that may increase import duties but lower the income taxes paid by the subsidiary. The most likely reason for these effects is that the:

  1. Price is an arm's-length price.
  2. Price is a cost-plus price.
  3. Transfer price is too low.
  4. Transfer price is too high.

Answer(s): D

Explanation:

A transfer price is the price charged by one subunit of a firm to another. When the subsidiarybuyer is in a foreign country, the higher the transfer, the higher the potential tariffs.However, the tax levied on a subsequent sale by the subsidiary will be lower because of its higher acquisition cost.



A global firm establishes a cost-based price for the firm's product in each country. The most likely negative outcome is that this pricing strategy will

  1. Set too high a price in countries where the firm's costs are high.
  2. Overprice the product in some markets and underprice the product in others.
  3. Create a gray market.
  4. Result in dumping.

Answer(s): A

Explanation:

A firm may set a cost-based price in each market with a standard markup. In a region or country where costs are high, this strategy may result in prices that are too high to be competitive within the local market.



A firm sells its product in a foreign market for a much higher price than in the firm's home market. The reason is most likely:

  1. Price elasticity of demand.
  2. Dumping.
  3. Gray market activity.
  4. Price escalation.

Answer(s): D

Explanation:

Price escalation is caused by an accumulation of additional costs, e.g., currency fluctuations; transportation expenses; profits earned by importers, wholesalers, and retailers; and import duties.



A firm sold the same product in many foreign countries but changed the ad copy to allow for language and cultural differences. According to teegan's model of adaptation strategies, the firm adopted a strategy of:

  1. Product adaptation.
  2. Communication adaptation.
  3. Dual adaptation.
  4. Straight extension.

Answer(s): B

Explanation:

Communication adaptation is a strategy that does not change the products, but advertising and marketing campaigns are changed to reflect the local culture and beliefs. For example, a firm may use one message but with changes in language, name, and colors. It may use a consistent theme but change the ad copy in each market. Another option is for a firm to devise a group of ads from which each market may choose the most effective. Still another option is to develop promotion campaigns locally.



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K.Tho commented on October 05, 2023
Very helpful
UNITED STATES
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