Speedy Grow Inc., based in Davenport, lowa, sells high-end fertilizers. Speedy Grow has two divisions: - North Italy mining division, which mines potash in northern Italy - US processing division, which uses potash in manufacturing top-grade fertilizer The processing division's yield is 50% : It takes 2 tons of raw potash to produce 1 ton of top-grade fertilizer. Although all of the mining division's output of 13,000 tons of potash is sent for processing in the United States, there is also an active market for potash in Italy. The foreign exchange rate is 0.80 Euro = $1 US. The following information is known about the two divisions: (i) (Click the icon to view the information.) Required Requirement 1. Compute the annual pretax operating income, in US dollars, of each division under the following transfer-pricing methods: (a) 150% of full cost and (b) market price. Begin by computing the operating income for the North Italy mining division under each method, and then calculate the operating income for the US processing division under each method. Information Required 1. Compute the annual pretax operating income, in US dollars, of each division under the following transfer-pricing methods: (a) 150% of full cost and (b) market price 2. Compute the after-tax operating income, in U.S. dollars, for each division under the transfer-pricing methods in requirement 1. (Income taxes are not included in the computation of cost-based transfer price, and Speedy Grow does not pay U.S. income tax on income already taxed in Italy.) 3. If the two division managers are compensated based on after-tax division operating income, which transfer-pricing method will each prefer? Which transfer-pricing method will maximize the total after-tax operating income of Speedy Grow? 4. In addition to tax minimization, what other factors might Speedy Grow consider in choosing a transfer-pricing method? Speedy Grow Inc., based in Davenport, lowa, sells high-end fertilizers. Speedy Grow has two divisions: - North Italy mining division, which mines potash in northern Italy - US processing division, which uses potash in manufacturing top-grade fertilizer The processing division's yield is 50% : It takes 2 tons of raw potash to produce 1 ton of top-grade fertilizer. Although all of the mining division's output of 13,000 tons of potash is sent for processing in the United States, there is also an active market for potash in Italy. The foreign exchange rate is 0.80 Euro = $1 US. The following information is known about the two divisions: (i) (Click the icon to view the information.) Required Requirement 1. Compute the annual pretax operating income, in US dollars, of each division under the following transfer-pricing methods: (a) 150% of full cost and (b) market price. Begin by computing the operating income for the North Italy mining division under each method, and then calculate the operating income for the US processing division under each method. Information Required 1. Compute the annual pretax operating income, in US dollars, of each division under the following transfer-pricing methods: (a) 150% of full cost and (b) market price 2. Compute the after-tax operating income, in U.S. dollars, for each division under the transfer-pricing methods in requirement 1. (Income taxes are not included in the computation of cost-based transfer price, and Speedy Grow does not pay U.S. income tax on income already taxed in Italy.) 3. If the two division managers are compensated based on after-tax division operating income, which transfer-pricing method will each prefer? Which transfer-pricing method will maximize the total after-tax operating income of Speedy Grow? 4. In addition to tax minimization, what other factors might Speedy Grow consider in choosing a transfer-pricing method