A company has affiliates in seven countries. Each affiliate enters into transact
ID: 1165745 • Letter: A
Question
A company has affiliates in seven countries. Each affiliate enters into transactions with the other affiliates in the course of business. The company has determined that on average a remittance from one affiliate to another costs $30. (This cost includes bank fees for international funds transfer, costs in each affiliate to process the payment/receipt, and average cost to exchange currency.) Except for this cost, the information for each question is specific to that question.
The following table indicates the aggregate quarterly invoices (in US$) between each affiliated company for a recent quarter.
Payee (thousands)
Payor (thousands)
Australia
Belgium
Germany
Japan
Singapore
UK
US
Australia
211
9
217
282
144
197
Belgium
139
228
99
170
298
272
Germany
278
160
59
294
65
220
Japan
93
94
298
6
296
186
Singapore
15
238
190
240
95
9
UK
70
260
47
86
281
247
US
125
294
153
220
272
216
3a. If the affiliates use bi-lateral payment netting, what payments should be made?
b. What is the total transaction cost for all payments with bi-lateral payment netting?
Payee (thousands)
Payor (thousands)
Australia
Belgium
Germany
Japan
Singapore
UK
US
Australia
211
9
217
282
144
197
Belgium
139
228
99
170
298
272
Germany
278
160
59
294
65
220
Japan
93
94
298
6
296
186
Singapore
15
238
190
240
95
9
UK
70
260
47
86
281
247
US
125
294
153
220
272
216
Explanation / Answer
a. Since all affiliates use bi-lateral payment netting, the net transaction would occur at the end of the quarter. The table given in the question has been used to form another table with only the net payments from the payor to the payee mentioned.
PayorPayee
Australia
Belgium
Germany
Japan
Singapore
UK
US
Australia
NA
72
-
124
267
74
72
Belgium
-
NA
68
5
-
38
-
Germany
269
-
NA
-
104
18
67
Japan
-
-
239
NA
-
210
-
Singapore
-
68
-
234
NA
-
-
UK
-
-
-
-
186
NA
31
US
-
22
-
34
263
-
NA
b. Since the transaction cost of one payment= $30 and the total number of transactions= 21, therefore, total transaction cost for payments= $30 X 21 = $630.
PayorPayee
Australia
Belgium
Germany
Japan
Singapore
UK
US
Australia
NA
72
-
124
267
74
72
Belgium
-
NA
68
5
-
38
-
Germany
269
-
NA
-
104
18
67
Japan
-
-
239
NA
-
210
-
Singapore
-
68
-
234
NA
-
-
UK
-
-
-
-
186
NA
31
US
-
22
-
34
263
-
NA
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