22-20 Multinational transfer pricing. effect of alternative transfer-pricing methods, global income tax minimizaljon. Tech Friendly Computer, Inc., with headquarters in San Francisco. manufactures and sells a desktop computer. Tech Friendly has three divisions. each of which is located in a different country: a. China divisionmanufactures memory devices and keyboards b. South Korea divisionassembles desktop computers using locally manufactured parts. along with memory devices and keyboards from the China division c. U.S. divisionpackages and distributes desktop computers Each division is run as a profit center. The costs for the work done in each division for a single desktop computer are as follows: China division: Variable cost = BUD yuan Fixed cost = 1,980 yuan South Korea Variable cost = 35,{i division: won Fixed cost = 4?,l} won U.S. division: Variable cost = $125 Fixed cost = $325 Chinese income tax rate on the China division's operating income: 40% South Korean income tax rate on the South Korea division's operating income: 20% U.S. income tax rate on the U.S. division's operating income: 313% Each desktop computer is sold to retail outlets in the United States for $3.8m]. Assume that the current foreign exchange rates are as follows: 9 yuan = $1 U.S. LEIGH won = $1 U.S. Both the China and the South Korea divisions seEI part of their production under a private label. The China division sells the comparable memoryi'keyboard package used in each Tech Friendly desktop computer to a Chinese manufacturer for 4.5 yuan. The South Korea division sells the comparable desktop computer to a South Korean distributor for 1,34,[i won. 1. Calculate the after-tax operating income per unit earned by each division under the following transfer pricing methods: {a} market pricer {b} E'i'l: of full cost. and {c} 35% of variable cost. [Income taxes are not included in the computation of the costbased transfer prices.) 2. Which transferpricing methodis} will maximize the aftertax operating income per unit of Tech Friendly Computer