Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Data table Chinglish Dirk (B). Chinglish Dirk Company (Hong Kong) exports razor blades to its wholly owned parent company, Torrington Edge (Great Britain). Hong Kong

image text in transcribedimage text in transcribedimage text in transcribed

Data table 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 18% and British tax rates are 33%. 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. 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.)

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

Sam Bankman Fried

Authors: Evelyn Everlore

1st Edition

979-8866401925

More Books

Students also viewed these Finance questions