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

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

The costs for the work done in each division for a single desktop computer are as follows: China division: South Korea division: Variable cost = 1,200 yuan Fixed cost = 1,800 yuan Variable cost = 340,000 won Fixed cost 490,000 won Variable cost = $110 Fixed cost = $190 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: 30% Each desktop computer is sold to retail outlets in the United States for $4,200. Assume that the current foreign exchange rates are as follows: 8 yuan = $1 U.S. 1,000 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 Friendly desktop computer to a Chinese manufacturer for 4,200 yuan. The South Korea division sells the comparable desktop computer to a South Korean distributor for 1,450,000 won. 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