Transfer Price Problem

ABC, a German company and XYZ, a Mexican company are related and conduct business with each other. ABC sells all the parts to XYZ for it's production. Relevant data (just trust me).... Assume all amounts are in the same currency:

ABC: German income tax rate = 14%

XYZ: Mexican income tax rate = 20%

XYZ import duty tax = 5%

ABC selling price and cost = 31 and 16

XYZ selling price = 50

ANSWER BOTH PARTS BELOW - ROUND ALL COMPUTATIONS TO FULL UNITS (NO DECIMALS)

(a) Compute the net income effect for the combined companies of one unit sold by ABC to XYZ and then sold externally. Show and label all computations.

(b) Should the transfer price be raised or lowered to maximize total profit? One word answer.