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Calculate 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 Tornington was reduced to 10% in the following table: (Round to the nearest British pound)

Calculate 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 Tornington was reduced to 10% in the following table: (Round to the nearest British pound)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Chinglish Dirk (A), Chinglish Dirk Company (Hong Kong) exports razor blades to its wholly owned parent company, Torrington Edge (Great Britain). Hong Kong tax rates are 18% and British tax rates are 33%. The markup was 15% and the sales volume was 2,500 units 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 after-tax profit and total tax payments? Calculate 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% in the following table: (Round to the nearest British pound) Constructing Transfer (Sales) Price per Unit Direct costs Chinglish Dirk X Torrington Edge Consolidated (British pounds) (British pounds) (British pounds) Data table £ 11,000 £ Overhead Total costs Desired markup Transfer price (sales price) £ 3,600 1,400 (Click on the following icon in order to copy its contents into a spreadsheet.) £ 14,600 £ Constructing Transfer (Sales) Price per Unit Chinglish Dirk (British pounds) Torrington Edge Consolidated (British pounds) (British pounds) Direct costs £ 11,000 £ 16,790 Income Statement Overhead Total costs 3,600 1,400 E 14,600 £ 18,190 Sales price £ £ Desired markup 2,190 2,729 Less total costs Transfer price (sales price) £ 16,790 £ 20,919 Taxable income £ £ Less taxes E Income Statement Profit, after-tax £ £ £ Sales price £ Less total costs Taxable income Less taxes Profit, after-tax £ 41,975,000 £ (36,500,000) 5,475,000 £ (985,500) 4,489,500 £ 52,297,500 (45,475,000) 6,822,500 (2,251,425) £ 3,236,925 4,571,075 £ 9,060,575
Transcribed Image Text:Chinglish Dirk (A), Chinglish Dirk Company (Hong Kong) exports razor blades to its wholly owned parent company, Torrington Edge (Great Britain). Hong Kong tax rates are 18% and British tax rates are 33%. The markup was 15% and the sales volume was 2,500 units 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 after-tax profit and total tax payments? Calculate 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% in the following table: (Round to the nearest British pound) Constructing Transfer (Sales) Price per Unit Direct costs Chinglish Dirk X Torrington Edge Consolidated (British pounds) (British pounds) (British pounds) Data table £ 11,000 £ Overhead Total costs Desired markup Transfer price (sales price) £ 3,600 1,400 (Click on the following icon in order to copy its contents into a spreadsheet.) £ 14,600 £ Constructing Transfer (Sales) Price per Unit Chinglish Dirk (British pounds) Torrington Edge Consolidated (British pounds) (British pounds) Direct costs £ 11,000 £ 16,790 Income Statement Overhead Total costs 3,600 1,400 E 14,600 £ 18,190 Sales price £ £ Desired markup 2,190 2,729 Less total costs Transfer price (sales price) £ 16,790 £ 20,919 Taxable income £ £ Less taxes E Income Statement Profit, after-tax £ £ £ Sales price £ Less total costs Taxable income Less taxes Profit, after-tax £ 41,975,000 £ (36,500,000) 5,475,000 £ (985,500) 4,489,500 £ 52,297,500 (45,475,000) 6,822,500 (2,251,425) £ 3,236,925 4,571,075 £ 9,060,575
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