requirement $2.$

$22-30$ Multinational transfer pricing, global tax minimization. Express Grow Inc., based In Ankeny, lowa, sells high$-$end fertilizers. Express Grow has two divisions:

North Italy mining division, which mines potash in northern Italy

U$.$S$.$ processing division, which uses potash in manufacturing top$-$grade fertilizer

The processing division's yield is $50\%$ : It takes $2$ tons of raw potash to produce $1$ ton of top$-$grade fertilizer. Although all of the mining division's output of $8,000$ tons of potash is sent for processing in the United States, there is also an active market for potash in Italy. The foreign exchange rate is $0\mathrm{.}80$ Euro $=$$$1$ U$.$S$.$ The following information is known about the two divisions:

Compute the annual pretax operating income, in U$.$S$.$ dollars, of each division under the following transfer$-$pricing methods: $($a$)150\%$ of full cost and $($b$)$ market price.

Compute the after$-$tax operating income, in U$.$S$.$ dollars, for each division under the transfer$-$pricing methods in requirement $1.($Income taxes are not included in the computation of cost$-$based transfer price, and Express Grow does not pay U$.$S$.$ income tax on income already taxed in Italy.$)$

If the two division managers are compensated based on after$-$tax division operating income, which transfer$-$pricing method will each prefer? Which transfer$-$pricing method will maximize the total aftertax operating income of Express Grow?

In addition to tax minimization, what other factors might Express Grow consider in choosing a transferpricing method?