Banff Limited (a Canadian company) imports die-cast parts from its Taiwanese subsidiary that are used in the production of children’s toys. Per unit, part 169 costs the Taiwanese subsidiary C$10.00 to produce and C$2.00 to ship to Banff Limited. Banff uses part 169 to produce a toy airplane that it sells to local toy stores for C$52.00 per unit. The following tax rates apply: 

Taiwanese income tax ............. 17%

Canadian income tax................26.5%

Canadian import duty...............20% of the invoice price

Required:

a. Determine the total amount of income taxes and import duties paid to the Canadian and Taiwanese governments if part 169 is sold to Banff Limited at a price of C$20.00 per unit. 

b. Determine the total amount of income taxes and import duties paid to the Canadian and Taiwanese governments if part 169 is sold to Banff Limited at a price of C$30.00 per unit. 

c. Explain why the results obtained in parts (a) and (b) differ.