People Able Computer, Inc., with headquarters in San Francisco, manufactures and sells a desktop computer. People Able has three divisions each of which is located in a different country. Each division is run as a profit center. Information on each division follows:

Data Table

The costs for the work done in each division for a single desktop computer are asfollows:

China division:	Variable cost	=	1,000 yuan
	Fixed cost	=	1,800 yuan
South Korea division:	Variable cost	=	360,000 won
	Fixed cost	=	480,000 won
U.S. division	Variable cost	=	$100
	Fixed cost	=	$200

	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 U.S. division's operating income: 28%

Each desktop computer is sold to retail outlets in the United States for $3,200.

Assume that the current foreign exchange rates are as follows:

8 yuan = $1 U.S.

1,200 won = $1 U.S.

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 People Able 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 1,560,000 won.

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) 300% 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

Requirement 2:

Which transfer-pricing method(s) will maximize the after-tax operating income per unit of People Able Computer?