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:

Requirements

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

Three Divisions a. China division - manufactures memory devices and keyboards b. South Korea division - assembles desktop computers using locally manufactured parts, along with memory devices and keyboards from the China Division c. U.S. division - packages and distributes desktop computers Data table The costs for the work done in each division for a single desktop computer are as follows: China division: VariablecostFixedcostVariablecostFixedcostVariablecostFixedcost=1,000yuan=1,800yuan=360,000won=480,000won=$100=$200 South Korea division: U.S. division - 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: 8yuan1,200won=$1U.S.=$1U.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