Question
Easy KeysEasy Keys Computer, Inc., with headquarters in San Francisco, manufactures and sells a desktop computer. Easy KeysEasy Keys has three divisions LOADING... , each
Easy KeysEasy Keys
Computer, Inc., with headquarters in San Francisco, manufactures and sells a desktop computer.
Easy KeysEasy Keys
has three divisions
LOADING...
, each of which is located in a different country. Each division is run as a profit center. Information on each division follows:
LOADING...
(Click to view the data.)
Requirements
1. | Calculate the after-tax operating income per unit earned by each division under the following transfer-pricing methods: (a) market price, (b) 200200% of full cost, and (c)350350% of variable cost. (Income taxes are not included in the computation of the cost-based transfer prices.) |
2. | Which transfer-pricing method(s) will maximize the after-tax operating income per unit of Easy KeysEasy 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)
200200%
of full cost, and (c)
350350%
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.)
| Method A | Method B | Method C |
China division | |||
Division revenue per unit |
|
|
|
Cost per unit: | |||
Division variable cost per unit |
|
|
|
Division fixed cost per unit |
|
|
|
Total division cost per unit |
|
|
|
Division operating income per unit |
|
|
|
Income tax at 40% |
|
|
|
Division net income per unit |
|
|
|
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started