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

Tech Friendly has three divisions (a. China division - manufactures keyboards and memory devices. 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) each of which is located in a different country. Each division is run as a profit center. Information on each division follows:

The costs for the work done in each division for a single desktop computer are as follows:

China division:	Variable cost	=	900 yuan
	Fixed cost	=	1,980 yuan
South Korea division:	Variable cost	=	350,000 won
	Fixed cost	=	470,000 won
U.S. division	Variable cost	=	$125
	Fixed cost	=	$325

	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 $3,800. Assume that the current foreign exchange rates are as follows:

99 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

Tech Friendly desktop computer to a Chinese manufacturer for 4,500 yuan. The South Korea division sells the comparable desktop computer to a South Korean distributor for

1,340,000 won.

Requirements

1.	Calculate the after-tax operating income per unit earned by each division under the followingtransfer-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.)
2.	Which transfer-pricing method(s) will maximize the after-tax operating income per unit of Tech Friendly Computer?