Chinglish Dirk (B). Chinglish Dirk Company (Hong Kong) exports razor blades to its wholly owned parent company, Torrington Edge (Great Britain). Hong Kong tax rates are 19% and British tax rates are 30%. The markup was 15% and the sales volume was 1,500 units. Chinglish calculates its profit per container as follows (all values in British pounds): Corporate management of Torrington Edge wishes to reposition profit in Hong Kong. It is, however, facing two constraints. First, the final sales price in Great Britain must be 20,000 or less to remain competitive. Secondly, the British tax authorities-in working with Torrington Edge's cost accounting staff-has established a maximum transfer price allowed (from Hong Kong) of 17,800. Prove that the optimal combination of markups is a 25.0 % markup at Chinglish and an 8.1% markup in Torrington Edge. What is the impact of this repositioning on consolidated after-tax profits and total tax payments? Calculate the profits of Chinglish Dirk and Torrington Edge, and the consolidated results of both, if the markup at Chinglish was increased to 25.0% and the markup at Torrington was reduced to 8.1% in the following table: (Round to the nearest cent.) Constructing Transfer (Sales) Price per Unit Chinglish Dirk Torrington Edge Consolidated (British pounds) (British pounds) (British pounds) Direct costs 10,000 Overhead 4,000 1,000 Total costs 14,000 E Desired markup Transfer price (sales price) Income Statement Sales price E Less total costs Taxable income E Less taxes E Profit, after-tax E (Click on the following icon in order to copy its contents into a spreadsheet.) Constructing Transfer Chinglish Dirk Torrington Edge Consolidated (Sales) Price per Unit (British pounds) (British pounds) (British pounds) Direct costs 10,000 16,100 Overhead 4,000 1,000 Total costs 14,000 17,100 Desired markup 2,100 2,565 Transfer price (sales price) 16,100 19,665 Income Statement Sales price 24,150,000 29,497,500 Less total costs (21,000,000) (25,650,000) Taxable income 3,150,000 3,847,500 Less taxes (598,500) (1,154,250) 1,752,750 Profit, after-tax 2,551,500 2,693,250 5,244,750