The XYZ Corporation is an American company that manufactures the parts needed for its products abroad in

Question:

The XYZ is an American company that manufactures the parts needed for its products abroad in country M. It assembles them in the U.S. The transfer price is $500 and the is 2 units of M-pesos for $1.

In April, the company will ship 1000 units from country M to the U.S. The plant, in country M, has variable costs of 650 pesos and fixed costs of 20,000 pesos. The processing cost in the U.S. is $10 per unit with fixed operation costs of $1000. The final product can be sold for $750 each. If the tax rate in country M is 20%, while in the U.S. it is 40%; what is the profit in each country? What are the combined profits in U.S. dollars for the month? What happens if we change the transfer price to $600? Why?

Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Exchange Rate
The value of one currency for the purpose of conversion to another. Exchange Rate means on any day, for purposes of determining the Dollar Equivalent of any currency other than Dollars, the rate at which such currency may be exchanged into Dollars...