LL Multinational plc transferred 4,000 units of product S from its manufacturing division in the USA to the selling division in the UK in the year to 31 December.
Each unit of S cost $350 to manufacture, the variable cost proportion being 75%, and was sold for $600. The UK division incurred marketing and distribution costs of $8 per unit. The UK tax rate was 30% and the exchange rate £ = $1.5.
The market price for each unit of product S in the USA was $600. The USA's division's profit after tax for its sales to the UK division for the year just ended was $750,000.
Required
(a) If the transfers were at variable cost, calculate the UK division's profit after tax.
(b) Calculate the tax rate in the USA if product S was transferred at the USA market price.