Use the following company case to answer questions 4 through 6. Chinglish Dirk Company (Hong Kong) exports razor blades to its wholly owned parent company, Torrington Edge (Great Britain). Hong Kong tax rates are 16% and British tax rates are 30%. Chinglish calculates its profit per container as follows (all values in British pounds). Corporate management of Torrington Edge is considering repositioning profits within the multinational company. What happens to the profits of Chinglish Dirk and Torrington Edge, and the consolidated results of both if the markup at Chinglish was increased to 20% and the markup at Torrington was reduced to 10%? What is the impact of this repositioning on consolidated tax payments? Hong Kong 16.0% 15.0% 1,000 Great Britain 30.0% 15.0% Assumptions Corporate income tax rate Desired markup on transfers Volume Constructing Transfer (Sales) Price Per Unit Direct costs Overhead Total costs Desired markup Transfer price (sales price) Income Statement (prices x volume) Sales price Le total costs Taxable income Less taxes Profit, after-tax Chinglish Dirk (British pounds) 10,000 4,000 14,000 2,100 16,100 Torrington Edge (British pounds) 16,100 1,000 17,100 2,565 19,665 16,100,000 (14,000,000) 2,100,000 (336,000) 1,764,000 19,665,000 (17,100,000) 2,565,000 (769,500) 1,795,500 D