Question: The XYZ Corporation is an American company that manufactures the

The XYZ Corporation 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 exchange rate 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? 


View Solution:


Sale on SolutionInn
Sales2
Views226
Comments
  • CreatedAugust 05, 2013
  • Files Included
Post your question
5000