Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

COLO C Datatable D Chinglish Dirk (B). Chinglish Dirk Company Hong Kong) exports razor blades to its wholy owned parent company Torrington Edge (Great

image text in transcribed
image text in transcribed
image text in transcribed
COLO C Datatable D " Chinglish Dirk (B). Chinglish Dirk Company Hong Kong) exports razor blades to its wholy owned parent company Torrington Edge (Great Britain) Hong Kong tax rates are 17 and British tax rates are 33%. The markup was 15% and the sales volume was 2,000 units Chinglish calculaten its profit per container as follows (al values in British pounds 23 Corporate management of Torrington Edge wishes to reposition profit in Hong Kong It , however, facing to constraints First, the final sales price in Great Britain must be F20.000 or less to remain competitive Secondly, the British tax authories -- in working with Torrington Edge's cost accounting staff has established a maximum transfer price allowed (from Hang Kong) of 17 800 Prove that the optimal combination of markups is a 250% matkup at Chinglish and an 81% markup in Torrington Edge What is the impact of this repositioning on consolidated for tax profits and total tax payments? Calculate the profits of Chinglish Dirk and Torrington Edge, and the consoldated results of both, it the markup at Chinglish was increased to 25 0% and the markup at Tomington want reduced to 81% in the following table (Round to the nearest cant) Constructing Transfer Chinglish Dick Torrington Edge Consolidated (Sales) Price per Unit (British pounds) (British pounds) (British pounds) Direct costs 10,000 Overhead 4000 1.000 Total costs 14.000 Desired markup Transfer price (nales price E Income Statement Sales price Less total costs Taxable income Less taxes Profil after-tax E What is the impact of this repositioning on consolidated alter-tax profits and total tax payments? With the optimal combination of a 250% markup in Hong Kong, resulting in a transfer price of 17.500,this allows Torrington Edge to impose an 81% markup on its sales and still stay under a sales price of C20.000 The statement above is (Select from the drop down menu) - Data table Constructing Transfer (Sales) Price per Unit Direct costs Overhead Consolidated (British pounds) Chinglish Dirk (British pounds) 10,000 4.000 14,000 2,100 16.100 Torrington Edge (British pounds) 16.100 1,000 17,100 2,565 Total costs Desired markup Transfer price (sales price) f 19,665 E Income Statement Sales price Less total costs Taxable income Less taxes Profit, after-tax 32,200,000 $ (28,000,000) 4,200,000 (714,000) 3,486,000 39 330,000 (34,200.000) 5.130,000 (1,692,900) 3.437.100 2,406,900 6,923.100

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Public Private Partnership Handbook

Authors: Malcolm Morley

1st Edition

0749474262, 978-0749474263

More Books

Students also viewed these Finance questions