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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
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) 350% 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.) Data table China division: Variablecost=1,200yuanFixedcost=2,300yuanSouthKoreadivision:Variablecost=390,000wonFixedcost=520,000wonVariablecost=$170Fixedcost=$175 U.S. division - Chinese income tax rate on the China division's operating income: 30% - 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: 40% Each desktop computer is sold to retail outlets in the United States for $3,800. Assume that the current foreign exchange rates are as follows: 10yuan1,300won=$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 Tech Friendly desktop computer to a Chinese manufacturer for 3,900 yuan. The South Korea division sells the comparable desktop computer to a South Korean distributor for 1,430,000 won
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