FGL Group Ltd is involved in fish processing and supply in various countries. Currently, the group has subsidiaries in Madagascar, Mauritius and Reunion Islands. The fish are cached in the Indian Ocean, that is mainly in these three countries territory and in accordance with the mutual agreement between these countries, the company can process the fish in any of these countries but will have to supply at least $50\%$ of the processed fish to these three Islands for their consumption. The company is expected to produce $1,200,000$ processed fish cans per year.

Production and exportation cost will be as listed below: Madagascar

Fishing cost is USD $5$ per unit produced

Labour cost is USD $7$ per unit produced

Exportation cost USD is $25,000$ per $1,000$ units

Local authority cost USD is $5,000$ per year

Management service fees are USD $50,000$ per year

Royalties payable to MTG is $2\%$ of revenue

Mauritius

Fishing cost USD $5$ is per unit produced

Labour cost USD is $10$ per unit produced

Exportation cost is USD $20,000$ per $1,000$ units

Local authority cost is USD $7,000$ per year

Management service fees are USD $50,000$ per year

Royalties payable to MTG is $2\%$ of revenue

Reunion

Fishing cost is USD $5$ per unit produced

Labour cost is USD $15$ per unit produced

Exportation cost is USD $10,000$ per $1,000$ units

Local authority cost USD is $15,000$ per year

Management service fees are USD $50,000$ per year

Royalties payable to MTG is $2\%$ of revenue

The tax law in these countries is as follows:

Madagascar tax rates:

Corporate tax: $30\%$

Withholding tax on dividend: $15\%$

The capital gain tax: $15\%$

Royalties withholding tax: $20\%$

Management service tax: $5\%$

Mauritius tax rates:

Corporate tax: $15\%$

Withholding tax: $10\%$

The capital gain tax: $5\%$

Royalties withholding tax: $5\%$

Management service tax: $0\%$

French tax rates:

Corporate tax: $40\%$

Withholding tax: $10\%$

The capital gain tax: $5\%$

Royalties withholding tax: $7\%$

Management service tax: $5\%$

The selling price of the processed fish cans is USD $50$ per unit in each of the three countries. However, the price is higher for those sold outside these three islands.

REQUIRED

a$)$ To recommend, based on the information provided above, whether the company should set up only one processing unit or one unit in each country.

$(30$ Marks$)$

b$)$ Explain the circumstances when the company could have charged different prices to each of the three countries.

$(10$ Marks$)$

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