E22-20 (similar to) EQuestion Help Easy Keys Computer, Inc., with headquarters in San Francisco, manufactures Requirements and sells a desktop computer. Easy Keys has three divisions, each of which is1. Calculate the after-tax operating income per unit earned by each division ocated in a different country. Each division is run as a profit center. Informationunder the following transfer-pricing methods: (a) market price, (b) 200% of on each division follows: full cost, and (c) 350% of variable cost. (Income taxes are not included in the computation of the cost-based transfer prices.) (Click to view the data.) 2. Which transfer-pricing method(s) will maximize the after-tax operating income per unit of Easy Keys Computer? Requirement 1. Calculate the after-tax operating income per unit earned by each division under the following transfer-pricing methods: (a) market price, (b) 200% of full cost, and (c) 350% of variable cost. (Income taxes are not included in the computation of the cost-based transfer prices.) Begin with calculating the after-tax operating income for the China division under each method. Then complete the table for South Korea and the United States Convert all foreign currencies to U.S. dollars) The costs for the work done in each division for a single desktop computer are as follows: Variable cost 1,080 yuan Fixed cost = 2,070 yuan China division South Korea division: Variable cost370,000 won Fixed cost500,000 won U.S. division Variable cost = $170 Fixed cost$280 Chinese income tax rate on the China division's operating income: 40% South Korean income tax rate on the South Korea division's operating income: 20% U.S. income tax rate on the US. division's operating income: 40% Each desktop computer is sold to retail outlets in the United States for $4,200. Assume that the current foreign exchange rates are as follows: $1 U.S. = $1 US. 9 yuan 1,000 won Both the China and the South Korea divisions sell part of their production under a private label. The China division sells the comparable memory/keyboard package used in each Easy Keys desktop computer to a Chinese manufacturer for 3,600 yuan. The South Korea division sells the comparable desktop computer to a South Korean distributor for 1,480,000 won. United States division Division revenue per unit Cost per unit 900 4200 595 170 170 280 450 450 170 280 450 145 Transferred-in cost per unit Division variable cost per unit Division fixed cost per unit 280 3750 Total division cost per unit Division operating income per unit Income tax at 40%