Chinglish Dirk Company (Hong Kong) exports razor blades to its wholly owned parent company, Torrington Edge (Great Britain). Hong Kong tax rates are 16% 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):

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Corporate management of Torrington Edge is considering repositioning profits within the multinational company. What happens to the profits of Chinglish Dirk and Torrington Edge, and the consolidated results of both, if the markup at Chinglish was increased to 20% and the markup at Torrington was reduced to 10%? What is the impact of this repositioning on consolidated after-tax profit 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 20% and the markup at Torrington was reduced to 10% in the following table:(Round to the nearest British pound.)

Constructing Transfer		Chinglish Dirk		Torrington Edge		Consolidated
(Sales) Price per Unit		(British pounds)		(British pounds)		(British pounds)
Direct costs		12,000
Overhead		4,000		1,000
Total costs		16,000
Desired markup
Transfer price (sales price)
Income Statement
Sales price
Less total costs
Taxable income
Less taxes
Profit, after-tax