Chinglish Dirk (C). 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 3196. The markup was 15% and the sales volume was 2,500 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. Not to leave any potential tax repositioning opportunities unexplored, Torrington Edge wants to combine the components described above with a redistribution of overhead costs. If overhead costs could be reallocated between the two units, but still total 5,000 per unit and maintain a minimum of 1,750 per unit in Hong Kong, prove that the optimal combination of markups is a 35.0% markup at Chinglish and an 4.64% 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 35.0% and the markup at Torrington was reduced to 4.64% in the following table: (Round to the nearest British pound.) Constructing Transfer (Sales) Price per Unit Torrington Edge (British pounds Consolidated (British pounds) Chinglish Dirk (British pounds) 10.000 1.750 Direct costs Overhead 3.250 11.750 Total costs Desired markup Transfer price (sales price) E L Income Statement Sales price Less total costs Taxable income Less taxes Profit, after-tax Constructing Transfer (Sales) Price per Unit Direct costs Overhead Chinglish Dirk British pounds 10.000 Consolidated (British pounds) Torrington Edge (British pounds) 16,100 1 000 17,100 2.565 4.000 Total costs Desired markup Transfer price (sales price) 14,000 2100 16.100 19,665 Income Statement Sales price Less total costs Taxable income 40,250,000 (35,000,000) 5.250,000 (997,500) 4.252.500 49,162,500 (42.750.000) 6.412,500 (1.987.875) 4.424,625 2.985.375 Less taxes Profit, after tax 8,677,125