Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Question list , Question 2 K People Friendly Computer, Inc., with headquarters in San Francisco, manufactures and sells a desktop computer. People Friendly has

image text in transcribed

Question list , Question 2 K 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: (Click the icon 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) 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 Friendly Computer? Question 3 */ Question 4 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 Met Data table Question 5 China division Question 6 Division revenue per unit Cost per unit: Question 7 Division variable cost per unit Division fixed cost per unit Total division cost per unit Division operating income per unit Question 8 Definition a. Income tax at 40% Division net income per unit 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 - The costs for the work done in each division for a single desktop computer are as follows: China division: South Korea division: Variable cost Fixed cost Variable cost = 1,000 yuan = 1,800 yuan Fixed cost = U.S. division = 360,000 won 480,000 won 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 $3,200Assume 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 Friendlydesktop computer to a Chinese manufacturer for 3,600yuan. The South Korea division sells the comparable desktop computer to a South Korean distributor for 1,560,000won.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Practical financial management

Authors: William r. Lasher

5th Edition

0324422636, 978-0324422634

More Books

Students also viewed these Finance questions