Kaplan Transfer Pricing – International Issues

A multinational Organization C has 2 divisions each in different country -Divisions A and B . Suppose Division A produces a product X where the domestic income tax rate is 40% and transfers it to Division B , which operates in a country with 50% rate of income tax. An import duty equal to 25% of the price of product is X is also assessed . The full Cost per unit is 190 and Variable Cost is 60
Required The tax authorities allow either variable or full cost transfer prices. Determine which should be chosen.
Kapalan Answer
Effect of Transferring at 190 instead of 60
Income of A is higher and so A pays 130 X 40% more income tax = (52)
Income of B is 130 $ lower and so C pays 130 X 50% Less income tax = 65
Import duty is paid at 25% = (32.5)
Net Effect ( Cost) of transferring at 190 instead of 60 (19.5)
Conclusion – C should transfer at variable cost
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1) This answer is beyond my comprehension. When transferring at full cost ( 190) how income gets increased by 130.
2) Thumb Rule is let the division in the country where income tax is to lesser extent ( 40% at A) makes maximum profit so that It pays less than ( B where it is 50%)
3) Why they have taken import duty into account – It has to be paid whether transfer by variable cost or full cost.
So answer should be let transfer be at full cost Not at Variable Cost.
Kindly make me understand this.
Deepak