USA Tires is a division of the Gibco Company. USA Tires produces bicycle tires in its automated plant in the Canada. Fixed costs per tire are $6, and variable costs are $2 per tire. The tires are shipped to a Gibco plant in Australia where bicycles are assembled and sold locally at a sales price of $55 each. Fixed costs to make the bicycles are $500,000 and variable costs per unit are $15 plus the cost of the tires. Gibco has a tax rate of 30% in Canada, and 20% in Australia.

a) Calculate the after-tax income for USA Tires, the Australian assembly division, and Gibco if 100,000 tires are transferred at USA Tires' full cost. Assume the 100,000 tires are all used to produce 50,000 bicycles.

b) Calculate the after tax income for USA Tires, the Australian assembly division, and the company as a whole if 100,000 tires are transferred at 110% of USA Tires' full cost. Assume the 100,000 tires are all used to produce 50,000 bicycles.

c) What would be your recommendation to Gibco?

d) Assuming that the tires were transferred at cost to Australia- Instead of selling the bikes in Australia, they can be sold back to USA and sold in Canada for $60. Does this make sense to transfer back to USA at 100% of full cost? (don't forget the fixed cost per unit).