Blue Computers produces computer screens in its Vancouver, Canada plant. The screens are then shipped to the company’s plant in Oregon, USA, where they are incorporated into finished monitors. Although the Vancouver plant doesn’t sell screens externally, the market for them is competitive. The market price is $694 per screen. Variable costs to make each screen total $317. Fixed costs at the Vancover factory are $1,862,000 per period. The Vancouver factory makes and ships 10,000 screens per period to the factory in Oregon. Taxes in Vancouver, Canada are 30% of pretax income. The Canadian plant has total assets of $20,360,000.

The Oregon plant incurs variable costs to complete the monitors of $116 per monitor (in addition to the cost of the screens). The Oregon plant’s fixed costs are $4,034,000 per period. The 10,000 completed monitors produced each period are sold for an average of $2,460 each. The tax rate for the Oregon, USA plant is 45% of pretax income. The Oregon plant has assets of $28,950,000.

All dollar amounts are in $USD.

1.What is the return on investment for each plant if the screens are transferred at variable cost:


2.What is the ROI for each plant if the screens are transferred at market price?

Answer rating: 100% (QA)

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