Able Electronics makes some of its products in Thailand and sells them in the United States. Able informs you that this year, it plans to transfer 250,000 units of a product (Variable cost = $10 per unit and associated fixed costs are $1,500,000 per year) from Thailand to the United States. The product sells for $25 per unit in the United States.

Required:
a. Suppose the transfer price were set at full cost. Considering this product alone, compute the profit reported in Thailand, in the United States, and for Able as a whole.
b. Suppose the transfer occurs at a price of $20 per unit. Considering this product alone, compute the profit reported in Thailand, the United States, and for Able as a whole.
c. What inferences do you draw about the role of transfer prices in determining the pretax profit for the corporation as whole? Will your conclusion generally hold if we consider after-tax profit?