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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 16% and British tax rates are 34%. The markup was 15% and the sales volume was 3,000 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? Chinglish Dirk Consolidated Constructing Transfer (Sales) Price per Unit (British pounds) Torrington Edge (British pounds) 16,100 (British pounds) Direct costs 10,000 Overhead 4,000 1,000 Total costs 14,000 17,100 2,100 2,565 Desired markup Transfer price (sales price) 16,100 19,665 Income Statement Sales price 48,300,000 (42,000,000) Less total costs Taxable income 6,300,000 58,995,000 (51,300,000) 7,695,000 (2,616,300) 5,078,700 Less taxes (1,008,000) 3,624,300 Profit, after-tax 5,292,000 10,370,700 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.) Constructing Transfer Chinglish Dirk Consolidated Torrington Edge (British pounds) (Sales) Price per Unit (British pounds) (British pounds) Direct costs 10,000 Overhead 4,000 1,000 Total costs 14,000 Desired markup Transfer price (sales price) Income Statement Sales price Less total costs Taxable income Less taxes Profit, after-tax CH