Easy KeysEasy Keys

Computer, Inc., with headquarters in San Francisco, manufactures and sells a desktop computer.

Easy KeysEasy Keys

has three divisions

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, each of which is located in a different country. Each division is run as a profit center. Information on each division follows:

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(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